G20

What is probably the most substantial summit meeting of global leaders is currently underway in Osaka.

The G20 summit involves the leaders of the world’s most important economies. These leaders represent two-thirds of the world’s population and 85% of the global economy.

In addition to the 19 countries and the president of the European Union, this year’s G20 meeting invited other leaders as guests. They include: the President of Chile who chairs the APEC, the Prime Minister of Thailand who chairs the ASEAN, the President of Egypt who chairs the African Union. Several other heads of state have been invited to Osaka.

The heads of several international organizations regularly attend the sessions of the G20. Included here are: the president of the Financial Stability Board, the director-general of the Food and Agriculture Organization, the secretary-general of the UN, the president of the IMF, the director-general of the ILO, the secretary-general of the OECD, the president of the World Bank, the director-general of the World Health Organization and the director-general of the World Trade Organization.

This is the 14th meeting of the G20. The plenary discussions will deal with a whole range of issues from climate change, trade issues and sustainable development.

Probably more important than the plenary sessions are the dozens of bilateral talks that will be held among the assembled leaders. Of these, the most closely watched is the bilateral meeting between Donald Trump and Xi Jinping.

Whatever happens during the closely observed Trump-Xi meeting will have broad repercussions on the entire global economy. The performance of the global economy has been stymied by the tariff war initiated by Trump. The trade war hung over the world’s markets like a dark cloud.

Lately, Trump has been making noises about imposing additional tariffs on $600 billion worth of goods China exports to the US. Such bluster is his usual pre-negotiation tactic. In most cases, he usually backs off – such as he did after he threatened Mexico with punitive tariffs unless they stem the flow of immigrants from Central America.

Both American farmers and the biggest corporations have been complaining about Trump’s hair-trigger threats of tariffs against the closest trading partners of the US. The tariffs already imposed cost American consumers dearly and pushed many farmers, especially those who cultivate soybeans, to the brink of bankruptcy.  China is the biggest consumer of US soybean exports.

Trump’s reckless threats of tariff impositions are keeping markets wary and distressing business leaders. It has yet to dawn on the American president that tariffs hurt his own people first and foremost.

China, for its part, appears to treat the tariff issue as a matter of managing Trump’s outburst. Beijing issues no threats but promptly retaliates with its own tariff impositions to match US actions. The Chinese appear to be digging in for the long game on this matter, hoping trade relations will normalize post-Trump.

For days before the G20 summit, protestors have been out in the streets in Hong Kong. They are trying to call attention to the cause of defending democracy in the special autonomous region. They are hoping that other world leaders will take up the matter with China’s powerful leader.

The world’s media will be paying close attention to see if any leader would dare take up the Hong Kong issue with Xi. Over the last few days, China’s foreign affairs establishment has been making it clear that they will not entertain any discussion on Hong Kong. They insist this is an entirely internal matter that no other country should meddle in.

In all the previous G20 meetings, the leaders routinely affirm their commitment to deepen free trade and undertake more decisive measures to combat climate change.

On these two concerns, Trump will stick out like a sore thumb. Among his first acts as president is to withdraw the US from the Paris Climate Accord. His administration’s official orthodoxy is to deny climate change. This sets him apart from the global consensus.

Trump has not fully appreciated the benefits of freer trade. He has been a mercantilist of the first order, willing to impose tariffs and other trade restrictions for the short-term gain of winning balance-of-trade advantages.

On the trade issues, too, Trump runs against the grain of global consensus. While he retreats from commitments to free trade, China and Europe have been busy forging free trade agreements with the rest of the world.

By defying the global consensus, and by using trade instruments as weapons to score domestic political points, Trump threatens to lead his country to a long episode of isolationism. This will not be good for the American economy in the long run.

In previous G20 meetings, global leaders have used the summit as an opportunity to collectively cajole Trump to take a more enlightened view on the trade and climate questions. They, obviously, were unsuccessful. The American president remains ensnared in a pre-modern view of how economies work.

Expecting Trump to change his worldview will be futile. The man barely exercises his literacy. He takes policy positions based solely on what will work for his reelection.

The only dramatic thing that could happen in Osaka will be an easing of the tariff war between Trump and Xi.  Analysts will study any slight variation in the language of the two leaders when they meet. They look for any hint in the body language of the two leaders.

That will determine if the world’s markets will rise or fall in the next week.