Xi serves humble pie to Trump at G20

By Khalid Hussain
President Xi Jinping of China served humble pie to his US counterpart Donald Trump in a confrontational G20 Leaders’ summit. Washington and Beijing have been looking for a solution to escalating tariffs war. However, the chances of a deal were slim considering the American belligerence.
So it came as a welcome surprise when China and the US declared a truce in their trade dispute on Saturday in Buenos Aires that threatened the global economy.
Trump has been loath to support statements in favour of global trade. It is ironic as America has been the leading architect of the post–cold war world order, an arch proponent of free trade and committed to multilateralism. The rule based trade system built on the “Washington Consensus” has been in peril because Trump says it is unfair to the United States. He levied hefty tariffs on American trading partners including his Western allies. So it is reassuring to note the United States of America does not appear to be as mighty as Donald Trump was trying to portray with his arbitrary decision making.
President Trump hailed an “incredible and productive meeting opening unlimited possibilities for China and the United States”. It was interesting to watch Trump trying to express enthusiasm about his “very special” relationship with Xi and his hope this will lead to “something great” for both countries. Xi did not make any public statement of his own on their deal.
According to Wang Yi, China’s Foreign Minister was happy on a “win-win” outcome of this meeting. He said the talks were “friendly and candid” with the two leaders reaching “important consensus”. The two presidents” agreed to put an end to the implementation of new tariffs,” Chinese Foreign Minister Wang Yi told a press conference after a two-and-a-half-hour working dinner. Vice Minister of Commerce Wang Shouwen said Washington was abandoning a 10%-25% tariff increase on China’s US$ 200 billion import tariff as of Jan. 1 next year.
The White House, however, added the decision to hike the tariffs was only suspended, specifically for a period of 90 days. According to the White House, China has committed to buying a “not yet defined but very substantial” amount of agricultural, energy and industrial goods from the US to reduce the huge trade imbalance between the two countries. China is also to reconsider any request for approval of the proposed merger between Qualcomm and NXP Semiconductors that was Beijing had previously blocked.
With this agreement, Xi Jinping avoids further pressure on the Chinese economy while Trump can alleviate the problems of agricultural states exporting to the China. Trump was hit hard by the mid-term US elections that brought a Democratic majority to the House of Representatives. This gave China a unique opportunity that allowed Xi to hold on key points while making major concessions.
At the outset of the G20, it was feared there will be no deal between the two largest economies of the world. The trade tariffs war between China and the United States since spring this year has been slowing down global growth. The IMF estimated that in the short term world GDP could be reduced by 0.75% if trade tensions continue to increase.
If the US could have its way all by itself, Trump would not have agreed to eat humble pie in Buenos Aires during the annual G20 Leaders’ summit. If the two countries fail to agree on “structural changes” in their trade relations, especially with regard to “forced” transfers of technology and intellectual property, “tariffs of 10% will be increased to 25%,” the US presidency had warned in a statement.
The summit brought divisions among the world leading economies to the fore from the moment their leaders gathered in Argentina. President Trump angered allies by striking his own exclusive deals. Russia and Saudi Arabia bonded to stave off further erosion in crude oil prices. Europeans criticised all of this as US negotiators stymied progress on managing migration, slowing climate change, and streamlining world trade governance. During the course of the summit, BRICS—Brazil, Russia, India, China and South Africa—slammed protectionism. at the G20 in Argentina on Friday when the summit was overshadowed by US President Donald Trump’s threat to escalate tariffs on China.
The Group of 20 (G20) started in 1999 as an international forum for the governments and central bank governors. Collectively, the G20 economies account for some 90% of the gross world product (GWP) and 80% of world trade. Membership consists of 19 individual countries–Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States–plus the European Union (EU). The original aim was limited to discussing policy pertaining to the promotion of international financial stability. This was expanded when the G7 could not control the contagion from the 2008 global financial crisis. The G20 have periodically conferred at summits ever since to address issues that go beyond the mandate of any one international organization.
The joint G20 commuiqué recognized the benefits of multilateral trade and agreed to reform the World Trade Organization. Leaders reaffirmed their commitment to “a rules-based international order”. This is a small yet very significant victory for free trade in the era of US President Donald Trump upending traditional diplomacy by instigating trade wars and employing aggressive protectionist policies and rhetoric. The joint statement affirms the importance of the multilateral trading system. However, it also contains concessions in the language to the US and China on protectionism and unfair trading practices. They did “note the current trade problems” without condemning protectionism, a formula quite modest in the light of the “America First” Donald Trump mantra.
The G20 Leaders’ declaration referred to global economic growth recognizing it has been increasingly less synchronized between countries and some of the key risks, including financial vulnerabilities and geo-political concerns, have partially materialized. It also obliquely mentioned the US position in her trade spat with China noting “current trade issues”. The G20 renewed “commitment to work together to improve a rules-based international order that is capable of effectively responding to a rapidly changing world”.
The G20 declaration is an unorthodox solution with language that sets the US apart. For example, a draft says 19 of the participants agree on the importance of upholding the Paris climate accord, but the US doesn’t. However, it was the first time the group failed to speak out against “protectionism,” a concession to President Trump. Experts have held it to be “the lowest final communiqué ever seen at a G20… the lowest common denominator, which raises the question of the G20’s credibility on trade,” said former Canadian negotiator Thomas Bernes, an expert at the Center for International Governance Innovation.
Despite many months of bluster directed at the trade policies of America’s closest neighbours, the Trump administration did negotiate revised trade agreements with both Canada and Mexico wherein all ended up making concessions. G20 leaders helplessly watch on crossing their fingers and hoping something similar to happen between China and the United States. This G20 meeting was part of the great diplomatic dance to try to ensure the global economy isn’t crippled by the refusal of its two biggest economies to move from their respective positions.
Domestic political problems for Australia, the United Kingdom, Germany and France means even the semblance of greater international consensus smothered in generic rhetoric is appealing. “Notwithstanding our differences, we have been able to agree a path forward at the G20,” French President Emanuel Macron told a news conference. “The United States has endorsed a clear multilateralist text.”
President Xi Jinping found the basis for a real deal that settles the big issues in the air. President Trump ate humble pie in assuring Xi Jinping of reprieve on any new tariffs on Chinese exports. It stands to reason that if there were any major caveats, there was no need for a truce. The prospect of a reduction in US-China trade tensions rather than a further escalation is a relief. Trump may not be finished confronting China but he cannot afford to crash down the whole multilateral trading system alienating most of his western allies.
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Khalid Hussain is Resident Editor of TLTP – You may contact Khalid Hussain at Resident.Editor@lawtoday.com.pk.pk