Last tango? Neat foot­work in Buenos Aires but over­all, a weak per­for­mance

The Guardian Weekly - - Spotlight - By Larry El­liott

Don­ald Trump and Xi Jin­ping ex­e­cuted their own ver­sion of the Ar­gen­tinian tango at the G20 sum­mit in Buenos Aires last week­end. Trade ten­sion be­tween the world’s two big­gest economies has in­creased markedly over the past 12 months and the chances of grave mis­steps were high.

In the end, Trump and Xi ex­e­cuted some neat foot­work. The trade war is not over but a 90-day truce has been agreed, which means that the 10% tar­iff Wash­ing­ton has im­posed on $200bn of Chi­nese im­ports will not be raised to 25% on New Year’s Day. Bei­jing must then con­vince Trump that it is meet­ing Xi’s pledge at the work­ing din­ner to in­crease what it buys from the US.

But be­fore any­body gets too car­ried away, it is worth in­ject­ing a cou­ple of words of cau­tion. For a start, we have been here be­fore. China thought it had a deal with the US sealed in the spring only for Trump to de­cide to im­pose tar­iffs any­way. Pro­tec­tion­ism has been play­ing well with Amer­i­can vot­ers.

Fur­ther, the fact that a de­ci­sion not to go ahead with a new round of tit-for-tat tar­iffs is seen as some sort of vic­tory speaks vol­umes about the weak­ness of in­ter­na­tional co­op­er­a­tion. No­body se­ri­ously thought the G20 gath­er­ing would ad­dress any of the global is­sues it is there to tackle: pre­vent­ing an­other fi­nan­cial cri­sis and co-or­di­nat­ing a sus­tain­able growth strat­egy, for ex­am­ple. It turned into the usual ex­cuse for glad-hand­ing and grand­stand­ing for politi­cians of­ten quite re­lieved to get away from trou­bles back at home.

The fact that the meet­ing was dom­i­nated by fears of a re­turn to 1930s-style pro­tec­tion­ism is sym­bolic of the re­treat from mul­ti­lat­er­al­ism in the 10 years since the first G20 sum­mit in Wash­ing­ton in late 2008. Trump’s trade agenda has not just in­volved im­pos­ing tar­iffs; he is also threat­en­ing to pull the US out of the World Trade Or­gan­i­sa­tion.

In the early days, there were hopes that the G20 would turn into an ef­fec­tive body for eco­nomic global gov­er­nance. This proved op­ti­mistic. Pres­sure for re­form waned as the econ­omy sta­bilised.

The lack of con­certed ac­tion mat­tered. It con­trib­uted to the weak­est re­cov­ery from re­ces­sion in liv­ing mem­ory, the de­lay in get­ting to grips with the eu­ro­zone cri­sis and the rise of pop­ulist sen­ti­ment across the de­vel­oped world.

With the fruits of what lit­tle growth there was go­ing mainly to the priv­i­leged few, it was not sur­pris­ing that vot­ers lost faith in mul­ti­lat­er­al­ism. A key rea­son why Trump’s pro­tec­tion­ist mes­sage res­onates with so many Amer­i­can vot­ers is that the trade agenda has been cap­tured by big busi­ness.

Not far from Buenos Aires, on the mouth of the River Plate lies the small Uruguayan sea­side town of Punta del Este. It was here in 1986 that diplo­mats from around the world ar­rived to launch a new round of trade talks. The Uruguay round took seven years to com­plete and re­sulted in the cre­ation of the World Trade Or­gan­i­sa­tion.

A quar­ter of a cen­tury ago the WTO was seen as the fu­ture. To­day it could be danc­ing its last tango. LARRY EL­LIOTT IS THE GUARDIAN’S ECONOMICS EDITOR


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