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