Outcome of the 2019 G20 Osaka Summit

July 19, 2019

The Genron NPO held a public forum on July 22, 2019 to discuss the results of the 2019 G20 Summit held in Osaka. The panel was made up of three representatives of the Japanese government involved with the running of the G20: Kenji Okamura, Director of the International Bureau at the Ministry of Finance (MOF); Tamaki Tsukada, (Deputy Assistant Minister of the Economic Affairs Bureau at the Ministry of Foreign Affairs (MOFA) and G20 Sous-Sherpa, and Tetsuya Watanabe, Director-General of for trade policy at the Ministry of Economy, Trade and Industry (METI). Joining them as commentator was Ichiro Fujisaki, former Japanese Ambassador to the United States.

The 2019 G20 Summit successes

Genron President Yasushi Kudo opened the forum by asking the panel to share some insight on the successes achieved during this year's G20 summit, held in a time marked by an increasingly antagonistic relationship between the U.S. and China.

Okamura spoke first and explained that one of the Summit's financial track successes was the high-level endorsement of principles adopted at the Finance Ministers and Central Bank Governors Meeting in Fukuoka regarding the building of high-quality infrastructure and debt sustainability, and on the taxation of tech giants. Another success was the statement on increasing capital for the IMF and the World Bank. In facing the challenges to global order by building a new parallel system, this statement is a sign of the desire to implement a more harmonious approach and engage with China by strengthening its position within the existing order.

Kudo asked what sort of judgement could be made about the global economic outlook, and Okamura responded by emphasizing the successful inclusion in the basic assessment of the statement that "increased trade tensions pose a major risk to the world economy." However, he pointed out that though the statement is an obvious one, the U.S. still opposed the wording. He touched upon how the discussion were in synch with talks at the Ministerial Meeting on Trade and Digital Economy that took place in Tsukuba, Ibaraki Prefecture at the same time as the Fukuoka meeting, and explained that the U.S. opposition to the statement was due to its position that the trade tensions posing a risk to the global economy are linked to the multilateral trading system. A compromise was achieved at the Fukuoka ministers meeting to use indirect terminology, and the wording used in the Fukuoka Communiqué was kept for the Osaka Leaders Declaration.

Asked about any successes made on the trade front, METI's Tetsuya Watanabe laid out the current issues: U.S.-China trade friction and the market-distorting measures implemented by China that led to that friction; how to respond to people who are unsatisfied due to the fact that they are seeing none of the benefits of globalization; and the problems arising from the current trade system being as yet unable to cope with digitalization and other technological advancements. Moreover, the rules of the system have yet to reflect the real changes that have taken place in the global economy. Countries must not only follow the rules, but the rules themselves must evolve, must be fortified, and the question of whether world leaders could come to an agreement on how to do so arose during this year's G20.

Watanabe noted that while there was no specific statement in the Leaders Declaration on the "fight against protectionism," there was a clear indication of the dedication to the fundamental philosophy underlying trade and investment in the inclusion of this statement: "We strive to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment." In addition, sufficient agreement was reached at the summit level regarding efforts to fortify and improve the system, and more specifically, on the implementation of WTO reform. Watanabe emphasized that the leaders were able to come to an agreement on the idea that "action is necessary" regarding reform of the dispute settlement system within the WTO. Regarding that necessity of action, Watanabe explained that Minister of Economy, Trade, and Industry Hiroshige Seko and U.S. Trade Representative Robert Lighthizer were able to iron out some of their differences during public and closed-door talks, and that those discussions had a hand in the success of the summit in Osaka.

MOFA's Tamaki Tsukada was asked to provide his opinion of the overall success of the 2019 G20 talks from the perspective of a G20 Sous-Sherpa. He was frank, describing that the Summit had every ministry coming together to address a wealth of topics, including trade, finance, the environment, tourism, and health, and that this nation-wide effort helped demonstrate Japan's comprehensive strength when the country works together. Tsukada also explained the difficulties inherent to the G20, and the difficulties Japan had as first-time host, describing it as "a zoo with many different beasts of prey." The diverse array of arguments made and opinions held by the 20 members helped him understand "that the true essence of multilateralism lies in how to seek out commonalities."

As an example of how difficult it is for members to uncover mutual commonalities, he noted the differences in arguments made by different countries regarding climate change.

"It was 19 to 1 (against the U.S.), and as G20 host, Japan aimed to find commonalities that every member, including the U.S., could agree upon in order to promote innovation and energy transition, and formulate a response to climate change. However, Germany, France and the rest of the European Union argued for the Paris Agreement terms to be brought to the forefront. They consulted with Prime Minister Shinzo Abe repeatedly, but no agreement was reached, and the section about the U.S. became an independent paragraph in the declaration. Tsukada described how they worked hard until the very last moments to avoid the situation becoming one of "the U.S. versus everyone else."

In conclusion, Tsukada noted that the G20 did face numerous difficulties, but they were ultimately able to achieve what they did due to the trusting relationships Prime Minister Abe has built with other countries during his many years in office, and by collaborating with Argentina, last year's host, to apply the many lessons they learned.

Ichiro Fujisaki himself had experience working as a Sherpa with the G8, and after hearing the statements from the three government officials, he described how the Declaration each year is written up each year: by reviewing the various issues the world is facing - economy, terrorism, democracy - and searching for the issues shared by the greatest number of members. Because the Summit is an annual event, the Declarations change only slightly, but that process offers members a chance to review risk areas before they become urgent issues, which makes the G20 Summit analogous to a general health checkup. The Summits also provide a forum and an opportunity for the holding of bilateral talks and offer the members a chance to determine the issues most have in common, and in that way, the G20 continues to play an important role.

However, Fujisaki noted that the words chosen for the Declaration should not be taken as a detailed expression of intent.

"There was some discussion today about the non-inclusion of the term 'fight against protectionism,' but the word 'protectionism' remains undefined. What is important is what needs to be done, and we should be concentrating on that," he said.

As the U.S.-China conflict divides the world, the G20 has a role to play in maintaining the rules and the international order

Kudo suggested that the world seems to be being swayed by the conflict between the U.S. and China. He asked the panelists what sort of role the G20 could play in the world as it is today.

Watanabe was first to respond to this question. He described how trade frictions cannot be resolved through the reciprocal application of tariffs, but through efforts that are in line with the rules, and that is why "We must fortify both the rules and the system."

It is there that Japan is strongly conscious of its potential to play the role of intermediary, Watanabe explained, saying that Japan is "not aiming to simply react to the actions of the U.S. and China, but rather is taking the situation as an opportunity to strengthen the rules." He noted that the other 17 members of the G20 have a similar mentality, and the G20's role lies in strengthening these rules.

Okamura responded by first saying that the history of the birth of the G20 does not lend itself to describing the organization as being based in the concept of unity. However, at the same time, he argued that, "There is some concern that emerging economies, particularly China, are already building their own versions of the order, one that operates outside of the existing order. Those rivaling axes of values are confusing the world."

The G20's value, he believes, lies in its ability as a large, external framework to contain those different value systems that are complicating issues.

Tsukada pointed out the necessity of the G20 taking an intermediate role that lies somewhere between agenda setting and ultimate rulemaking. As a concrete example, the EU, the G7 and other developed countries already have defined norms and an ultimate vision on how to the deal with the issue of marine plastic waste. However, he said that those ideas must be spread to China, India, Indonesia and other such countries, and the G20 can be used as an intermediate forum that will provide a foothold for spreading those ideas. In a similar way, concepts such as Prime Minister Abe's Data Free Flow with Trust (DFFT) proposal, presented during this year's World Economic Forum in Davos, could gain global recognition with the blessing of an organization like the G20. That is another indicator of the importance of the G20 as it engages in the next round of rulemaking.

Towards the 2020 G20 Summit - harnessing the successes achieved in Osaka

Kudo posed one final question to all panelists.

"Next year, the G7 presidency will be held by the U.S., while the G20 presidency will be held by Saudi Arabia. When extremely distinctive countries serve as host countries, how should Japan support those countries as we try to move the G20 forward?"

Watanabe discussed the commercial aspect in his response to Kudo.

"We are working hard to achieve anything we can on what was agreed in Osaka, for example regarding WTO reform," he explained. "In addition to the G20, there is also the biannual WTO Ministerial Conference in June 2020, and we are sure to achieve much there. We need to take any potential successes there to the next G20 summit and use those to bolster up the areas that need it."

Okamura said, "In terms of finance, Japan, Saudi Arabia, and the U.S., all belong to a group that shares fundamentally similar ideas on infrastructure, digital taxation, and governance of the IMF/World Bank."

For this reason, he is optimistic that the financial issues are not as worrisome as some may think. On the other hand, he showed some anxiety regarding the passive response on the part of Saudi Arabia and the U.S. to the climate change issues that threw a spanner in the discussions at this year's G20, and regarding Saudi Arabia's ability to coordinate discussions when it takes the presidency for next year's G20.

Tsukada mentioned his proposal for Saudi Arabia to use its presidency to address economic challenges arising from population change, and the opportunities and challenges that come from science and technology. While they may be very general themes, for Japan, they serve as a base for harnessing the successes of Osaka.

He also pointed to one topic that arose numerous times during the discussions: that of fighting protectionist policies. There is already a tariff battle being waged between the U.S. and China, and more important than including a statement addressing the issue in the Leaders Declaration is having the perspective needed to determine how to deal with it. While the "multi-faceted trade system" terminology was not included in the Declaration made at the end of the Osaka Summit either, Tsukada praised the Summit's success in including similar phrasing that delineated the need for freedom, fairness, nondiscrimination, predictability, and a stable order, and stated that members should continue discussions from the perspective of how to stand up to the issues the world faces. He also pointed out his desire for the G20 to address the unfair trade practices that lie at the heart of the protectionist stance the U.S. has taken.

Kudo concluded the public forum by expressing his appreciation to the panelists for providing their professional insight on the successes achieved during Japan's first G20 summit. However, he also pointed out a contradiction regarding the Blue Ocean Vision initiative Japan pushed so strongly as host nation; the ruling Liberal Democratic Party's manifesto for the coming weekend's House of Councilors election contained almost no mention of how the government plans to handle the waste plastic problem.

"In dealing with global issues, the government must not limit itself to words. It also needs to work domestically to provide the population of Japan with an understanding of the issues faced," Kudo said. With that, he brought the public forum to a close.

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