The WTO has forecast that global trade will expand by 2.4% in 2017, and between 2.1% and 4% in 2018. However, these estimates look unrealistic, given the uncertainty provoked by the UK’s withdrawal from the EU and protectionist measures being adopted by the US. The rise of protectionist trade and investment measures, particularly by the Donald Trump administration in last six months, could affect demand and investment flows, and cut economic growth over medium-to-long term.
In light of these factors, there is a risk that trade expansion in 2017 and 2018 will not reach expected levels. The G20, an informal international governance group established in 2009 after the global financial crisis for global prosperity and sustainable development, had its annual summit in Hamburg in Germany on July 8-9. The 12th summit was special in the context of rising threat to globalisation and issues like sustainable development, immigration, climate change, terrorism, etc.
In keeping with established practice, the German G20 Presidency had invited Spain, the Netherlands, Norway and Singapore to attend the G20 meet this year. It also invited the chair of the African Union (AU), the chair of the New Partnership for Africa’s Development (NEPAD) and the chair of the Asia Pacific Economic Cooperation (APEC) as observers and participants. The summit witnessed contributions and active participation from the UN, IMF, World Bank, WTO, OECD, FSB, ILO and WHO.
Inclusion of a large number of countries at the summit was only apt, as the G20 has grown in stature and importance in the last decade, and it continues to address challenging issues facing the world economy. It is high time, given its growing stature and relevance, that member countries take a decision soon to establish a G20 secretariat to ensure that collective action among the top nations takes place in a sustained manner and meet the three aims of the current presidency—building resilience, improving sustainability and assuming responsibility. Against the backdrop of a real threat to globalisation and sustainable development, particularly after Trump took over as the US President, the G20 reinforced the agenda of global prosperity and equity in some measure.
In the run up to the Hamburg summit, G20 finance ministers and central bank governors met in Baden in March 2017 and discussed global economic situation, monetary policy, risks of digitisation and other key issues concerning global economy. However, the members had some minor issues in bringing out the communiqué in Baden-Baden as deep divisions between other western countries and Trump on climate change, trade and migration were quite evident. In their main communiqué, the G20 countries had to forego the pledge to keep an open and inclusive global trade system after being unable to find a suitable compromise with an increasingly protectionist US. The German Chancellor has challenged Trump’s “America First” policies, saying that global problems cannot be solved with protectionism and isolation. She pledged to ensure that there would be a successful outcome of the G20 summit focusing on free trade and multilateral efforts to keep the global economy on a high growth trajectory. As mentioned above, Germany also ensured that the summit is largely inclusive with participation of countries who are not members.
However, going ahead, the challenges to G20 summits are quite daunting. The German Presidency has to work harder to reverse inward-looking trade policies and protectionism that would add to the sluggish global growth and lead to further decline in trade and investment flows throughout. The G20 needs to ensure and urge its member countries to repose faith in the rule-based multilateral system led by the WTO, facilitate deeper cooperation in trade and in boosting investments.
An important highlight of this year’s summit was the special focus on Africa. The summit aimed to encourage private sector investment, support infrastructure development, and greater economic participation and employment in Africa. In addition to South Africa, the G20’s only African member, the leaders of Guinea, Kenya and Senegal were invited as guests. The purpose is to help Africa so that rampant immigration, both legal and illegal, to Europe slows down.
In sum, with increasing nationalist sentiments and anti-immigration protests worldwide, the G20 launched a discussion and strongly advocated on the opportunities and risks of globalisation. During its Presidency, if Germany is able to drive home the point that the positive effects of globalisation far outweigh the effects of isolation and protectionism, it would be a huge success. The protests surrounding the summit are not only against Trump and Putin, but in general against capitalism and the war on terrorism perpetrated against Islamic groups in Syria, etc.
One can only hope that G20 members show responsibility of the highest order and speak in one voice, and thwart all protectionist and anti-globalisation tendencies to ensure free and fair global trade architecture. Only time will tell whether the G20 summit in Hamburg would succeed in bringing globalisation on track. It’s time for all non-US members to stand up to the causes of G20 formation. Otherwise, it would be difficult to achieve the goal of sustainable global prosperity which is shared among not only member countries but non-member countries as well.