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US Prevails in an Unusual G-20 Communique | ASHARQ AL-AWSAT English Archive 2005 -2017
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President Donald Trump walks to the White House after arriving on Marine One, Sunday, March 19, 2017, in Washington. Trump is returning from a trip to his Mar-a-Lago estate in Palm Beach, Fla. (AP Photo/Alex Brandon)

In one of the most highly anticipated Group of 20 communiques in a long time, the US administration appears to have prevailed over the objections of many countries, including from Europe, Australia and China.

In an outcome that not so long ago would have been deemed unlikely, the communique dropped the world’s most economically influential countries’ explicit opposition to protectionism and, instead, came up with what Bloomberg Markets calls “a fudged statement on trade.”

The driver of this G-20 outcome is President Donald Trump’s strong view that the US has been repeatedly shortchanged by various trade agreements. As such, the new administration has threatened to impose restrictions against trading partners should trade not be both fair and free. Also, as part of its tax reform thinking, the administration is said to be looking into the possibility of a “border adjustment tax” to raise revenue to offset tax cuts elsewhere and higher outlays on infrastructure.

While this is an historically unusual outcome for the G-20 — and in defiance of what had become conventional wisdom, if not a doctrine, for quite a few years — the communique should not come as a great surprise: It reflects a new US reality that, given the structure of the global economy, the rest of the world cannot bypass because of America’s strong negotiating position. To understand why, consider two simple realities that speak to the willingness and ability of the US to pursue internationally unpopular positions.

First, the new US administration is willing to break with tradition. Indeed, in some cases it is actively engaged in upending certain conventional wisdom and existing practices. Trade is at the top of the international list (and Obamacare on the domestic list). And the administration feels the need to do so, if only for domestic political reasons.

The administration is also able to impose its unconventional views on others. The US is at the center of the world order — economically, financially, diplomatically and militarily. It is the most powerful nation in the world, the issuer of the reserve currency and, the lead and most influential voice in many multilateral deliberations.

The US also has another negotiating advantage to which other countries have yet to adjust.

By having articulated so clearly and repeatedly its “America First” position, including in last week’s budget blueprint, the new administration has staked out an unambiguous negotiating position. Moreover, it knows that, should the world end up in a trade war, the damage to the economy would likely be less than that felt by many, many other countries. As such, others are faced with an unpleasant lose-lose situation in which accepting a bad outcome is better than risking a much worse one.

But this is not to say that the world will necessarily slip into a stagflationary protectionist spiral. If rational behaviors prevail, the more likely outcome is a series of (bilateral, regional and multilateral) renegotiations that keep trade open but re-align certain governing practices and procedures in favor of the US, including those that pertain to non-tariff barriers and standards. It is a world in which the US initially gains economically, but does so at the risk of other countries looking to reduce over the longer-term their reliance on a global order whose center is dominated by America.