Gulf News

G20 brings gains on trade, oil

- Mo­ham­mad Al Asoomi ■ Dr Mo­ham­mad Al Asoomi is a UAE eco­nomic ex­pert and spe­cial­ist in eco­nomic and so­cial devel­op­ment in the UAE and the GCC coun­tries. Finance · Politics · Business · World Politics · G20 · Buenos Aires · United States of America · China · Washington · International Monetary Fund · World Bank · Italy · European Union · Union · Donald Trump · Canada · Mexico · NAFTA · Saudi Arabia · Saudi Arabia national football team · Russia · Russian Empire · Organization of Petroleum Exporting Countries · G-20 Summit · World Trade Organization

There are still some who pin hopes on G20 sum­mits, which fea­ture the world’s largest economies, to solve many com­plex eco­nomic is­sues that pose chal­lenges to the fu­ture of a glob­alised econ­omy. The be­lief is that the G20 will take some col­lec­tive ac­tion to avoid acute crises.

How­ever, the great dis­par­ity be­tween the po­si­tions and in­ter­ests of the 20 coun­tries re­mains an ob­sta­cle to reach­ing a col­lec­tive un­der­stand­ing. The lat­est G20 sum­mit, which was held in Buenos Aires, dis­cussed two im­por­tant is­sues, namely trade and trade pro­tec­tion­ism and fi­nan­cial sta­bil­ity.

Yet, no ac­tion was taken to ad­dress the dif­fi­cul­ties fac­ing global trade, which has ex­pe­ri­enced fierce wars with reper­cus­sions felt across all coun­tries. In ad­di­tion, the fi­nan­cial con­di­tions are get­ting com­pli­cated by con­tin­ued debt growth, and pose threats that may lead to a new fi­nan­cial cri­sis and laden with grave con­se­quences.

On the first is­sue, lead­ers of the two largest economies — the US and China — agreed to tem­po­rary stop their “cock­fight”. They also agreed to a three-month trade truce in which no higher tar­iffs would be im­posed on $267 bil­lion worth of US im­ports from China and which had threat­ened to im­pose ad­di­tional du­ties of $233 bil­lion. This, in re­turn, prompted China to im­pose du­ties of $100 bil­lion on im­ports from the US.

How­ever, it is yet to be known how things will progress af­ter the agreed truce.

Hope for WTO

The pos­i­tive is that the sum­mit agreed to re­form the World Trade Or­gan­i­sa­tion (WTO) af­ter it was about to col­lapse as Wash­ing­ton an­nounced its in­ten­tion to with­draw. This res­o­lu­tion has given some hope for the sur­vival of the or­gan­i­sa­tion, and a chance to main­tain the achieve­ments it had made over the last two decades.

With re­gard to fi­nan­cial sta­bil­ity, no mea­sures were taken de­spite the pres­ence of

IMF and World Bank chiefs.

Things have re­mained the same in spite of some im­mi­nent risks to the global econ­omy. Many coun­tries are un­able to pay not only their debts but also what they have in­curred on in­ter­est and ser­vic­ing of these debts.

In ad­di­tion, the debts of some large coun­tries, such as Italy, are threat­en­ing an en­tire eco­nomic bloc — the Euro­pean Union — nec­es­sary for the sta­bil­ity of the global econ­omy.

It seems that the side agree­ments signed be­tween lead­ers of the G20 were more ef­fec­tive than the col­lec­tive ones. US Pres­i­dent Don­ald Trump suc­cess­fully forced Canada and Mex­ico to sign a new trade agree­ment to re­place the ex­ist­ing Nafta af­ter hav­ing it amended to suit US in­ter­ests.

Saudi Ara­bia and Rus­sia also reached an agree­ment to sta­bilise oil prices at cur­rent rates, fol­low­ing a sig­nif­i­cant drop last month. This is an im­por­tant achieve­ment for the oil-pro­duc­ing coun­tries and con­tributed to ris­ing oil prices from this week to $62 per bar­rel com­pared to $59 last week.

This agree­ment sets a strong ba­sis for the de­ci­sions to be taken by the Opec at its meet­ing on Thurs­day (De­cem­ber 6), which will also hold a com­ple­men­tary meet­ing for pro­duc­ers from out­side the or­gan­i­sa­tion on Fri­day. This will main­tain prices at be­tween $60-$70 per bar­rel, which is the fair price at which they are sup­posed to sta­bilise.

Thus, the G20 sum­mit par­tially con­tributed to over­com­ing some trade hur­dles and sta­bil­is­ing oil prices, which is vi­tal for the global econ­omy. Mean­while no re­sult was achieved on the fi­nan­cial risks, and a wors­en­ing cri­sis will cast shadow on the global econ­omy.

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