Awkwardness at the G-20

Each year, leaders of the G–20 nations meet to discuss the state of the world economy and self-select into two camps: the liberal democracies, and all the rest. The leader of the former group usually sets the agenda for the meeting, while the head of the latter spoils it, encouraging fellow members to use their collective geopolitical and economic clout to stick it to the arrogant and fading Western order. This year’s meeting in Hamburg on July 7–8 was no different, in a way, but there was a role reversal: Chinese President Xi Jinping and German Chancellor Angela Merkel rallied the group in a stirring defense of the Paris climate accord as U.S. President Donald Trump holed up in an extended meeting with Russian leader Vladimir Putin. 

Before the summit, observers anticipated awkwardness between Trump and the other heads of state and general uncertainty given the United States’ abdication of global leadership. The shift was all the more stark given that Germany, as this year’s host nation, set the summit’s agenda. Because of that, this year’s “Action Plan”—the key document to come out of any G-20 meeting—emphasized free trade, combating climate change, and welcoming refugees, policies that the Trump administration has vocally opposed. That said, in a nod to the protectionist policies of the United States, as well as the United Kingdom and other countries, the action plan also acknowledged that “legitimate trade defense instruments” were important to keeping international trade on a level playing field. Acknowledging China’s Belt and Road initiative, a massive infrastructure plan to connect East Asia to Africa and Eurasia, the action plan also emphasized the need to manage excess industrial capacity. (Although the Belt and Road initiative is billed as an infrastructure development plan, one of the main problems it is supposed to solve for China is its overproduction of steel.) 

In a rebuke to the closed-border sentiment sweeping liberal democratic nations, the G–20 voiced the need to “support those countries that choose to develop pathways for migration.” Finally, in a highly unusual move, the United States received specific censure for withdrawing from the climate accord. Not only did “the leaders of the other G–20 members state that the Paris agreement is irreversible,” but the action plan made sure to highlight that the United States was being unreasonable in its professed commitment to national interests. 

It would appear that the other G–20 nations were attempting to carry on with business as usual—only now behind the leadership of Germany and China, which continue to carry the banner for internationalism. But when comparing the policy agreements coming out of the G–20 meeting this year with those of former years, as well as the tone of the conferences, it becomes clear that the populist agenda has had some influence on the organization’s outlook—and possibly for the better. 

A longstanding criticism of the G–20 (and other international organizations of its kind) is that it binds countries to purported global policy goals that are more appropriately left to the domestic sphere. For example, at the 2014 G–20 summit in Brisbane, initiatives such as backing infrastructure development and improving education, although generally good policies to pursue in any context, should be up to countries to decide on for themselves. On the other hand, problems such as climate change, international taxes, and the cross-border flows of capital are truly global in nature and require broad coordination.

The policy pledges that came out of this year’s G–20 recognized that distinction. Each country offered nonspecific proposals devoid of the numerical targets that are usually present in G–20 action plans, and each tended to focus on domestic policies. Germany pledged a lower debt-to-GDP ratio in line with its preference for austerity. The United States was particularly reluctant to elaborate on its proposals, only offering accommodative monetary policy for short-term economic growth and declining to commit to any efforts toward medium- and long-term growth. It also had nothing to say about inclusive growth or decreasing the amount of risk in its financial system to prevent another global economic shock. The Trump administration did, however, offer to implement major tax reform. China was more game to engage, but even it only offered tepid and inward-looking goals, such as lowering tax burdens on small businesses, improving its business environment, and encouraging foreign investment. China also agreed to waive tuition at public high schools and provide subsidies to poor children at private high schools to promote inclusive growth.

As can be seen by their respective pledges on promoting global growth, most of the G–20 countries did not necessarily endorse a significantly more global agenda than the United States. All look after their domestic priorities first, but Germany and China were more willing to at least keep up appearances of supporting global growth. Importantly, however, China and the other G–20 countries strongly signaled that they took truly global problems such as climate change, money laundering, and tax policy seriously. Each of these issues has been addressed by various formal international agreements and is governed by bodies such as the OECD, the Financial Action Task Force, the Financial Stability Board, and the G–20 itself. On climate in particular, the G–20 emphasized that the plan presented at the end of this last meeting would be definitive so as not to allow duplicate processes to slow down implementation.

Ironically, this subordination of G–20 influence on domestic issues in favor of international ones was precisely what many observers hoped Merkel and Xi would avoid in the absence of U.S. leadership. Those hopes, though, failed to recognize that neither country wants the spotlight and fiercely safeguards its national interests. After Trump was elected, both Germany and China were presented with the opportunity to do much more as global leaders, but both have refused. 

At the same time, Germany’s and China’s leadership roles have come through their participation in regional or international organizations. Germany owes its current preeminence to its understanding and leveraging of the EU structure. And although Beijing will never admit to it, China owes its economic and geopolitical prominence to the economic architecture provided by the Bretton Woods institutions of the WTO, IMF, and World Bank. They provided a framework China could use to shape its growth. For that reason, both Germany and China will continue to preserve the place of international organizations even if they will not set their domestic agendas with an eye toward universal applicability. The nationalists at this year’s G–20, such as the United States, should take note.