IT has traditionally been a summit where heads of state and government of the 20-largest economies focus on issues relating to global economic growth, international trade and financial market regulation.
Backed by clear and present United States leadership, the inaugural Group of 20 (G20) Summit in Washington, D.C. in 2008 had set the tone for the most dramatic reform of global finance for over 60 years.
Issues tackled with urgency in subsequent summits include measures to deal with tax evasion and avoidance, thus reining in tax havens; global financial reforms in the aftermath of the 2008 financial crisis, including greater controls on hedge funds and rating agencies; setting up the Financial Stability Board at the International Monetary Fund to boost efficacy as a watchdog for the global financial system; doing away with new barriers to trade; stricter regulations for too-big-to-fail banks; introduction of directives to reduce indebtedness of countries and stricter capital adequacy and liquidity regulations for banks (known as the Basle III Concordat); the promotion of sukuk as an instrument to fund infrastructure in emerging countries; boosting youth employment, free trade and implementation of the global climate agreement (The Paris Accord) signed at The United Nations Climate Change Conference in December 2015; the Summit in Hangzhou, China, last year that focused on strengthening inclusive growth of the global economy in the long term, partly by harnessing new sources of growth and raising production potential; the potential of the digital economy and its impact on society; and, action on migration and refugee movements.
While the above aspirations continue to be “work in progress” for the foreseeable future, the G20 Summits, unlike other global get-togethers, which are more exercises in civil service tourism, have proven to be a reasonably effective platform to get business done. For instance, the huge strides made against tax evasion and avoidance, money laundering and corruption.
But, if a week is a long time in politics, then a decade must be a light year. For this year’s G20 Summit, hosted by German Chancellor Angela Merkel in her birth city of Hamburg today and tomorrow, promises to be game-changing, which may undermine the hard-earned progress made since 2008.
The reason — the election of Donald Trump as the 45th president of the US. Trump has hardly settled into the Oval Office in the White House, and he already gave orders to repeal the Glass-Steagall Act, which separates commercial banking from investment banking; jettisoned US participation in The Trans-Pacific Partnership trade deal; adopted an isolationist foreign policy, including threatening to leave the North Atlantic Treaty Organisation at one stage; and most disturbingly of all, exited US participation from the Paris Climate Change Accord.
All these in the misguided pursuit of “Making America Great Again” and putting “America First”.
Trump will not be the only fault line in Hamburg. This summit promises to be excruciatingly challenging given the emergence of major disputes involving G20 countries, which potentially have global economic and geopolitical implications.
He will meet his Russian counterpart, Vladimir Putin, for their first meeting since he became president.
Russia is under investigation by US Special Prosecutor Robert Mueller for alleged interference in the US elections through hacking and bribery. Russia is sponsoring a proxy war in Ukraine supporting separatists.
How will discussions pan out given that Trump supports cordial relations with Moscow, whereas his EU colleagues, including Britain, France and Germany, are far more sanguine about Russian intentions?
In the Gulf, Saudi Arabia, with the world’s largest proven oil reserves, has imposed a blockade against Qatar, with the world’s second-largest gas reserves.
Saudi Arabia, together with Turkey and Indonesia, are the only three Muslim member countries of the G20. With Turkey and Iran supporting Doha, and Trump siding with Riyadh, the potential for conflagration in the Middle East into the Israeli-Palestinian conflict is real.
Turkish President Recep Tayyip Erdogan, too, has come under intense criticism from EU leaders for his perceived autocratic rule and human rights violations.
Merkel has even banned him from addressing a gathering of Turks during his G20 visit.
It is the Trump factor that is setting the agenda. Merkel defiantly has stated that the summit will focus on furthering the aims of the Paris climate deal, which puts her on a direct collision course with Trump.
She got the backing of the EU in a summit last week.
Tackling climate change remains a priority for Europe, emboldened by the recent election of centrist anti-nationalist governments in Netherlands and France.
The US contributes about 15 per cent of global carbon emissions, but it is also a significant source of finance and technology for developing countries in their efforts to fight rising temperatures. Instead of retrograding to the polluting effects of coal, the US may leverage its pole position in renewables and green energy, thus creating future jobs in clean fuel.
The EU, China, India and even major states in the US, especially California, have warned Trump that they will go ahead with the Paris Accord irrespective of his administration’s antics.
Merkel is showing moral leadership, which Trump has abdicated in pursuit of hubris and ideology.
Whether there will be room to meaningfully discuss other pressing issues — migration, refugees, terrorism, trade protectionism, which in reality is the net effect of Trump’s “America First” policy, and the North Korea nuclear issue, is doubtful.
Will Trump as a distraction mean that other countries with serious fault lines, such as China with its human rights record, its still-closed economy and its territorial ambitions in the surrounding seas, will get away without opprobrium?
This year’s G20 Summit has a poignant theme, “Shaping an interconnected world”. If Merkel even begins to achieve this in Hamburg over the weekend, it will be nothing short of yet the latest “German miracle”!
MUSHTAK PARKER is an independent London-based economist and writer.