Trade Tensions, Economic Implications Fuel Debate at G20, WTO Meetings
The escalation in trade tensions among various economies sparked intense discussions in meetings from Buenos Aires, Argentina, to Geneva, Switzerland, this past week, as officials in both the G20 and WTO context weighed what this continued strain could mean for the global economy, for the multilateral trading system, and for individual countries and their constituents.
On Monday and Tuesday of this week, WTO members gathered at the organisation’s Geneva headquarters for informal meetings of the Trade Negotiations Committee (TNC) and at the level of Heads of Delegation (HoDs), with trade tensions a key item for discussion.
“There is real and justified concern about the escalation we are seeing. Whether or not you call it a trade war, certainly the first shots have been fired,” said WTO Director-General Roberto Azevêdo on Tuesday 24 July.
Along with warning that this would have a significant commercial impact, he also called on members to become more vocal in raising awareness of the risks of new restrictive measures, along with advocating for the positive benefits of trade.
“There is also a potential systemic impact, which poses a greater threat in the longer term, particularly if countries begin to accept this tit-for-tat dynamic as the new normal,” he warned.
The global trade club has a series of meetings planned this week, on multiple fronts that deal both systemic trade issues as well as their efforts at crafting updated trade rules.
For example, negotiators have been meeting during the first half of the week to advance talks on disciplining harmful fisheries subsidies, with a busy work programme planned from September to December. WTO negotiators working on farm trade met last week, with members weighing a suite of new proposals and planning to meet on a monthly basis after the global trade club resumes its meetings in September.
Meanwhile, the WTO General Council is meeting on 26-27 July, with a packed agenda that includes reports on the negotiations and implementation of past ministerial decisions; submissions from members on how to approach the future of an existing moratorium on duties on electronic transmissions; as well as an agenda item requested by the United States to discuss its papers on China’s allegedly “trade-disruptive” economic model.
Members are also due to sign off on the date and venue for their next ministerial conference, with Kazakhstan being the one member to have submitted a bid to host. When the WTO returns from its August hiatus, members are slated to have a hefty workload, addressing both the continued tensions over new, unilateral tariffs, as well as the impasse over naming new judges to the Appellate Body, and how to advance subject-specific negotiations on areas like fish and agriculture.
G20 finance officials: Dialogue, action essential to “mitigate risk”
The WTO meetings at the start of the week come just after finance ministers and central bank governors from the G20 coalition of major advanced and emerging economies stressed the value of trade and investment to create jobs and spur continued economic growth.
They also cautioned after their meeting in Buenos Aires on Sunday 22 July that “heightened trade and geopolitical tensions” could take a severe toll on the global economy. The officials’ meeting marked their third such gathering under the Argentine G20 presidency.
“International trade and investment are important engines of growth, productivity, innovation, job creation, and development. We reaffirm our Leaders conclusions’ on trade at the Hamburg Summit and recognise the need to step up dialogue and actions to mitigate risk and enhance confidence,” they added.
They also repeated past language on “working to strengthen the contribution of trade to our economies,” without specifying further what this dialogue and these actions should or could entail. Some officials afterward indicated that the meetings were, however, a positive sign, even if more work remains to de-escalate the current situation.
“As trade tensions cast a shadow of uncertainty over the global economy, my meetings with international partners in Buenos Aires showed encouraging support for multilateral solutions. Europe will continue to work to build bridges, while firmly defending our interests,” said Pierre Moscovici, European Commissioner for Economic and Financial Affairs, on Twitter after the meeting concluded.
Lagarde: Policymakers must tackle trade tensions, craft updated rules
Leading up to the G20 meeting, the International Monetary Fund (IMF) released an update to its projections for the global economy’s performance, with Managing Director Christine Lagarde urging officials to look past short-term concerns towards more far-reaching implications.
“Even as we confront the immediate threats to the global economy we cannot afford to ignore the long-term challenges,” the IMF chief said. “Trade tensions are already leaving a mark, but the extent of the damage depends on what policymakers do next.”
She thus called G20 members to “move past self-defeating tit-for-tat tariffs” and engage in talks to craft new or updated trade rules, covering topics such as e-commerce, digital services, and intellectual property rights. Doing so, she said, would be key in helping prepare the workforce of the future while also averting job losses from the rise of automation.
The IMF also issued projections for a series of potential economic scenarios, warning that global GDP could take a significant hit by 2020 if all tariff announcements come to fruition, especially if the tariffs also put a damper on “investor confidence.”
“Under one scenario, if all currently announced tariffs go into effect, global output would be reduced by 0.1 percent in 2020. And if investor confidence is shaken by these tariffs, our simulation shows that global GDP could decrease by 0.5 percent – or roughly US$430 billion – below the current projection for 2020,” said Lagarde.