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Editorial: G20 summit fails to ease U.S.-China trade tension

  • June 30, 2019
  • , Mainichi , p. 5
  • JMH Translation
  • ,

Japan hosted in Osaka its first-ever G20 summit and the meeting wrapped up a two-day program. With the world facing a number of issues on the global economy and the environment, Japan’s leadership as the host nation was tested.


How to deal with the U.S.-China trade war was the issue that dominated the G20 summit. But U.S. President Donald Trump and Chinese President Xi Jinping only agreed to a truce. The G20 summit failed to create the opportunity to build international coordination to ease tensions.


The entire world was closely watching the U.S.-China summit, given the significant impact that the two nations can have on the global economy. President Trump had indicated that he would impose tariffs on all Chinese goods if the talks with the Chinese leader failed to produce results. But after the meeting, he announced that the tariffs would not be imposed for the time being.


Division of global economy


If U.S.-China tensions escalated into a full-blown face-off, the global economy would be seriously affected. American firms, which are increasingly impacted as a result of higher tariffs, are also voicing objections. President Trump must have taken this into account.


Nonetheless there are few prospects for addressing the U.S.-China trade conflict. This is because the issue has gone beyond rectifying trade imbalances. The U.S. and China are now entering a new stage of competition for global high-tech dominance. This is directly linked to national security.  


A worrisome factor is that the economic spheres that the U.S. and China are building to better serve their own interests may facilitate the division of the global economy.


The U.S. bans Huawei, which leads the world in the next-generation 5G technology, and is pressing its allies to follow suit. To challenge this, President Xi met with Russian President Vladimir Putin ahead of the G20 summit. During their meeting, Huawei signed a deal with a Russian telecommunication firm.  


After his meeting with President Xi, President Trump expressed his intention to approve the U.S. sale of parts to Huawei. But he seems to maintain his basic stance of banning Huawei products in the U.S. as part of its deal with China.  


The U.S. criticizes China for awarding its high-tech firms excessive subsidies. But the development of industry in public-private collaboration forms the bedrock of state capitalism, a system unique to China. This is where the Xi administration cannot make concessions.


This year marks the 30th anniversary of the end of the Cold War. The economic globalization, a feature of which is China’s rise, has accelerated. American firms came to assemble products, such as affordable yet high-performance smart phones, in China by sourcing parts from South Korea and Japan to roll them out throughout the world. If the U.S.-China conflict prolongs, the international division of labor, which has long supported the post-Cold War economic development, may cease to function.


The initial role of the G20 was to facilitate cooperation to contribute to the stability of the global economy. But it became enfeebled with the establishment of the Trump administration, which advocates an “America first” policy. This time, too, it failed to perform its role.


Symbolic was the G20 leaders’ failure to include text opposing protectionism into the Osaka Leaders’ Declaration. The same happened last year, when the language was deleted to take into account the Trump administration.


The G20 summit, which was launched in response to the 2008 global financial crisis, stipulates in its declaration “anti-protectionism.” It consists of countries with different systems. Nonetheless, countries found it necessary to collaborate as their economies globalize. So “anti-protectionism” was what the members shared as a basic principle.


At the Osaka summit, concerns were raised about the U.S.-China conflict. The leaders’ declaration said “tensions over trade pose risks to the global economy.” But there were no signs that showed the U.S. and China took it seriously. They agreed to a truce, but this was just a by-product of their horse-trading.


G20 showed certain achievement in plastic waste


In Europe, which used to facilitate international cooperation with the U.S., pro-cooperation momentum is on the decline. This precisely highlights that the world is at the mercy of the U.S.-China power game.


As the chair, Japan made efforts to rebuild international cooperation. Japan took the initiative in including the reform of the World Trade Organization (WTO) into the leaders’ declaration to create a mechanism that calls for China to address the subsidy issue and to keep the U.S. in the multilateral framework.


The G20 achieved results in the creation of international rules for the digitization of the global economy and in addressing marine pollution caused by plastic waste.


But the role that Japan could play was limited. The government initially forecast it would be difficult to include “anti-protectionism” in the declaration text. Prime Minister Shinzo Abe told the other leaders at the meeting that “limiting trade in retaliation for another country’s action would benefit nobody,” but he refrained from going further. He might have thought that it would be better not to provoke the U.S., with which Japan is engaged in negotiations.


The most important thing is for the U.S. and China to explore a path to co-existence in their future negotiations. As superpowers, they are responsible for keeping the global economy stable.


President Trump perhaps thinks that his hardline approach with China may give him an edge in the presidential election. But he should not plunge the world into turmoil just to win reelection.


China’s state capitalism is something outside international standards. The elimination of reliance on state subsidies should help provide the Chinese economy with stable growth. This is an issue that China must address on its own.

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