Fair winds ex­pected from Buenos Aires

Hopes are high that G20 sum­mit will pro­vide a breath of fresh air to help world lead­ers chart a new course

China Daily European Weekly - - Cover Story - Wang Huiyao The au­thor is founder and pres­i­dent of the Bei­jing-based Cen­ter for China and Glob­al­iza­tion. The views do not nec­es­sar­ily re­flect those of China Daily.

Adecade af­ter the first G20 lead­ers meet­ing in Wash­ing­ton, world lead­ers will meet this week in Buenos Aires, Ar­gentina, for the 2018 G20 Sum­mit. This time is dif­fer­ent due to an ex­pected side­lines bi­lat­eral meet-up that the world is keep­ing a close eye on.

Ten years ago, with the on­set of the fi­nan­cial cri­sis, it was rec­og­nized that a new global gov­er­nance plat­form was needed to meet transna­tional chal­lenges and adapt to shifts in the world econ­omy. In par­tic­u­lar, it was hoped that mov­ing to a more in­clu­sive mech­a­nism than the tra­di­tional G7 would bet­ter re­flect the im­por­tance and in­ter­ests of de­vel­op­ing coun­tries and emerg­ing mar­kets such as China, In­dia and Ar­gentina. The mem­bers of the group ac­count for around 90 per­cent of the world GDP and 80 per­cent of global trade. It is thus fit­ting that this de­cen­nial sum­mit should take place in Buenos Aires, a cul­tural melt­ing pot shaped by in­ter­na­tional trade and mi­gra­tion.

The po­lit­i­cal land­scape has shifted dra­mat­i­cally in the decade since that first sum­mit in Wash­ing­ton. To­day, how­ever, the world again finds it­self at a cross­roads. Re­cent years have seen a rise in anti-glob­al­iza­tion sen­ti­ment around the world, and coun­tries that helped to build the in­ter­na­tional or­der are now un­der­min­ing the very in­sti­tu­tions that sup­port it. The global gov­er­nance deficit has widened as mul­ti­lat­eral in­sti­tu­tions have failed to re­form and adapt to new chal­lenges.

The Buenos Aires G20 Sum­mit of­fers a chance for world lead­ers to rein­vig­o­rate mul­ti­lat­er­al­ism and avert a slide to­ward in­creased pro­tec­tion­ism and iso­la­tion. This sum­mit takes on ex­tra sig­nif­i­cance be­cause it is ex­pected to see a cru­cial meet­ing between Pres­i­dent Xi Jin­ping and US Pres­i­dent Don­ald Trump — their first face-to-face meet­ing since China and the United States be­came em­broiled in a dam­ag­ing trade dis­pute that has seen sev­eral rounds of puni­tive tar­iffs im­posed by both sides, with the threat of more to come. Is­sues to be ad­dressed in the ex­pected dis­cus­sion will af­fect not only the out­look for the world’s two largest economies, but also work­ers and con­sumers in third coun­tries and the global econ­omy at large.

The Xi-Trump meet­ing, ex­pected to take place on Nov 30, pro­vides a chance to de-es­ca­late bi­lat­eral ten­sions that have in­ten­si­fied over the past year. It is hoped that through this dis­cus­sion, Xi and Trump can reach a con­sen­sus on a frame­work agree­ment that can help guide fu­ture talks and re­solve the cur­rent dis­pute. Since Trump re­cently sig­naled that he would like to make a break­through with his Chi­nese coun­ter­part dur­ing the sum­mit, it’s likely that the lead­ers’ meet­ing would set a sound tone for a fi­nal way out for the two sides.

De­spite the chal­lenges to be over­come in putting the Sino-US re­la­tion­ship back on an even keel, there are good rea­sons to be op­ti­mistic that the two sides can steer away from the cur­rent course and avert draw­ing the world into a dam­ag­ing trade war re­sult­ing in costs that no one could af­ford.

First, China’s eco­nomic in­ter­ests are deeply en­twined with the US and in­deed ev­ery other ma­jor econ­omy in the world. Re­cently, some ob­servers have in­voked the idea of an “eco­nomic iron cur­tain” de­scend­ing between the world’s two largest economies, draw­ing par­al­lels with the de­te­ri­o­ra­tion of re­la­tions between the US and the Soviet Union af­ter World War II. How­ever, this fram­ing com­pletely fails to cap­ture the re­al­ity of China-US re­la­tions in to­day’s glob­al­ized econ­omy.

In the late 1940s, the US and Soviet Union shared lit­tle in the way of bi­lat­eral trade and in­vest­ment. By con­trast, in our cur­rent age of deep­en­ing glob­al­iza­tion, the US and China are bound by global value chains that en­able in­creas­ingly so­phis­ti­cated spe­cial­iza­tion and di­vi­sion of la­bor across bor­ders. Given the densely wo­ven links shared by China, the US and other trad­ing part­ners, any at­tempts to force a “de­cou­pling” of the world’s two largest economies would cause mas­sive dis­rup­tion and long-term eco­nomic dam­age to both coun­tries and the global econ­omy.

Lead­ing in­ter­na­tional or­ga­ni­za­tions have al­ready re­vised growth fore­casts for 2019 down­ward due to un­cer­tainty over the eco­nomic re­cov­ery and im­pact of the on­go­ing Sino-US trade dis­pute. Any fur­ther es­ca­la­tion of the trade ten­sions would se­ri­ously threaten the frag­ile re­cov­ery of the world econ­omy.

Sec­ond, de­spite fric­tions in the bi­lat­eral re­la­tion­ship, Trump and Xi have es­tab­lished a good rap­port and friendly re­la­tion­ship with each other. Main­tain­ing this per­sonal bond can sta­bi­lize re­la­tions and help both sides to over­come their dif­fer­ences and come to a mu­tu­ally ben­e­fi­cial agree­ment on a way for­ward. Given the cen­tral roles of both fig­ures in their re­spec­tive ad­min­is­tra­tions and Trump’s unique gov­er­nance style, this top-level “lead­er­ship diplo­macy” is of par­tic­u­lar im­por­tance and could hold the key to unlocking the cur­rent im­passe.

Third, and ar­guably most im­por­tant, China and the US still have enor­mous po­ten­tial syn­er­gies to ex­ploit through closer co­op­er­a­tion. A re­la­tion­ship “re­set” would not only help avert more eco­nomic dam­age, but it could also open up av­enues for deeper co­op­er­a­tion and mu­tual ben­e­fits. For ex­am­ple, there is great po­ten­tial to ex­pand Sino-US co­op­er­a­tion in in­fra­struc­ture, par­tic­u­larly given the match between the Trump ad­min­is­tra­tion’s large-scale in­fra­struc­ture plan and China’s fi­nan­cial re­sources and con­sid­er­able ex­pe­ri­ence in this field. It is also vi­tal that the two sides work to­gether if they are to ad­dress ma­jor transna­tional chal­lenges, such as cli­mate change, poverty al­le­vi­a­tion and ter­ror­ism.

Given the high stakes at hand, China and the US have a re­spon­si­bil­ity to make sig­nif­i­cant ef­forts to put their bi­lat­eral re­la­tion­ship back on track. This should start with both coun­tries ac­cel­er­at­ing the re­struc­tur­ing of their own economies, build­ing on the foun­da­tion of do­mes­tic re­forms to bring about a joint im­prove­ment in the trade im­bal­ance.

For China, this means press­ing for­ward with im­ple­ment­ing poli­cies to open up the econ­omy, such as re­lax­ing mar­ket en­try re­quire­ments and of­fer­ing a fair and open mar­ket­place to the world. As Pres­i­dent Xi said at the re­cent im­port expo in Shang­hai, over the next 15 years, China is set to im­port $30 tril­lion (26.5 tril­lion eu­ros; £23.5 tril­lion) worth of goods and $10 tril­lion in ser­vices. Fur­ther moves to boost im­ports should be made to ben­e­fit Chi­nese con­sumers and en­sure that China’s mar­ket con­tin­ues to be an en­gine for the global econ­omy.

At the same time, the US should aban­don bi­ased poli­cies that un­fairly tar­get China and ar­ti­fi­cially in­flate the trade deficit, such as re­stric­tions on high-tech ex­ports to China. Lift­ing these re­stric­tions could ben­e­fit both economies, sup­port­ing work­ers in the US and help­ing to re­duce the trade deficit. Ac­cord­ing to a study by the Carnegie En­dow­ment for In­ter­na­tional Peace, a third of the US trade deficit with China could be re­duced by lift­ing ex­port con­trol to China to a level equiv­a­lent to France.

In ad­di­tion to pur­su­ing these changes at home, China and the US should also in­crease their sup­port for global gov­er­nance in­sti­tu­tions. The G20 in par­tic­u­lar has great prom­ise to serve as an ef­fec­tive plat­form to fa­cil­i­tate co­op­er­a­tion between the two sides, help­ing them achieve shared ob­jec­tives and con­trib­ute to global pub­lic good.

Re­form of the mul­ti­lat­eral trad­ing sys­tem should be high on the agenda, to help strengthen the World Trade Or­ga­ni­za­tion and help avert any pos­si­bil­ity of a slide back to 1930sstyle pro­tec­tion­ism. The G20 should also pro­mote talks on how to deal with new tech­nolo­gies and forms of trade.

By work­ing to­gether through the G20, the US and China can help to build a new gen­er­a­tion of global gov­er­nance mech­a­nisms to ad­dress key is­sues re­lated to the tra­di­tional ones, like global warm­ing and WTO dead­lock, and emerg­ing ones, such as dig­i­tal econ­omy and au­toma­tion in the new era, help­ing to en­sure that all can ben­e­fit from these in­no­va­tions and so­ci­eties around the world are ready for dra­matic shifts in the way we work and in­ter­act.

It is said that Buenos Aires (trans­lated as “fair winds”) was named by sailors ar­riv­ing on the Rio de la Plata, blessed by good winds. This week, the city may just pro­vide the breath of fresh air nec­es­sary to help world lead­ers chart a new course for­ward.


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