G-20: A dinner in Buenos Aires that will (for a while) stop the world

By Marcelo Cantelmi

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The novelty went almost unnoticed in Argentina, despite what might predict the outcome of the imminent G-20 summit in Buenos Aires. For the first time in its almost 30 years of existence, APEC’s annual meeting last weekend in Papua New Guinea concluded without a joint declaration. The failure is a consequence and notorious expression of the destructive scope of the tariff war between the U.S. and China that is negatively influencing the world economy. APEC is an Asia-Pacific international governmental forum whose members, from the US to China, account for half of world trade and almost 60% of global goods production. It is a more executive G20. At that meeting, cross-checks between the two major powers even involved the future of the World Trade Organization, which regulates international transactions. Washington is questioning it because it authorized Beijing’s entry, and the Chinese government intends to reform it in order to shore up its battle against the U.S. protectionist wave.

The Global Times, one of the voices of the Chinese PC, raised the failure of APEC as a premonition for Argentina. The absence of a declaration “increases the importance” of the meeting that Donald Trump will hold in Buenos Aires with his colleague Xi Jinping, he said and warned that “it is to be hoped that Washington has made a serious preparation for that meeting and is not distracted from exerting pressure”. The comment reacted to the remarks made a few days ago in Asia by U.S. Vice President Mike Pence, who, in an ultimatum tone, stated that Buenos Aires will be the last opportunity Washington offers to the Asian power. In his APEC speech, the official hardened the escalation with an attack on the militarization of the islands and reefs in the South China Sea; underestimated the Beijing Silk Road program of investments in Eurasia; denounced the theft of intellectual property by the Central Empire and demanded a total opening of its economy. If China does not line up, Pence said they will multiply sanctions on the entire binational trade.

Neither side seems to be in a position to give in today. “No one expects the (Trump-XI) dialogue to prevent tariff increases on January 1,” acknowledged Eugene Low, DBS Bank strategist at the South China Morning Post. Buenos Aires will replace Washington as the scene of a last attempt at conciliation, says the newspaper after the scheduled meetings in the U.S. capital were frozen. The meeting in Buenos Aires will be held at the proposal of the U.S. The meeting will be held in Buenos Aires on Saturday evening, in the restaurant of a hotel whose name is kept in reserve. At the table would be on the U.S. side the hawk John Bolton, National Security Advisor, Chancellor Mike Pompeo, the head of Economy Steve Mnuchin, Wilbur Ross Trade, and four other officials and diplomats, including the trade advisor Peter Navarro, another hawk and relentless critic of China. On the other side, it is expected that along with Xi Jinping, among other officials, will be the vice premier Liu He, head of the trade negotiations; Dinx Xuiexiang, head of the president’s cabinet, and Yan Jiechi, his main advisor on international affairs.

Liu He will arrive in Buenos Aires directly from Germany. What makes this data relevant is that the EU and Beijing have just put aside their differences and jointly presented themselves before the WTO to denounce as illegal the steel and aluminium sanctions imposed by Washington. An antecedent on how the sandbox is being shaped.

In the diplomatic world there is scepticism about this meeting but nothing is ruled out. If the U.S. proposed it, it is because it is interested in achieving a result. But diplomatic sources in Beijing preferred caution against this chronicler because they understand that the axis of the clash is not only the trade deficit that Trump denounces. China, which does not intend to deviate from its own trajectory, proposed to Mnuchin to dilute that red in two years. But the White House ignored the offer because the objective issue is the power dispute between the two powers.

The IMF and now the Organisation for Economic Co-operation and Development (OECD) warn of a slowdown in world growth as collateral damage of this confrontation. “The international system that has governed trade since the end of the Second World War has weakened,” said Angel Gurría, secretary general of the organization. The hope of a change in the cycle is based on the supposed awareness of some red line that should not be crossed.

In the markets there is a double concern from the deterioration of the business climate produced by the commercial war. On the one hand, this circumstance increases investors’ fear of a sudden collapse of financial markets. That fall would spread quickly due to the electronic operation that could even magnify the event. The other shadow is that of an end of cycle, ten years after the 2008 crisis, which anticipates the arrival of a recession “with no date yet, but which will probably come earlier than expected,” JPMorgan analysts point out. The effects of this process could not be stopped, but they could be alleviated. “Trade is threatened and the lack of dialogue (between powers) is the main concern,” they say in the OECD. Hence the world will look at Buenos Aires with a unique intensity this coming Saturday.

Meanwhile, the U.S. has dusted off the Cold War weapons. There is no more talk of Asia Pacific, but of Indo-Pacific space, a term that Pence repeated 41 times in his APEC speech. The concept seeks to abandon the idea of a community of interests between the U.S. and East Asia and move it to another that links Washington to a handful of democracies in that part of the world, particularly India, Japan and Australia. These four countries make up the so-called Quad group (for Quadrilateral Security Dialogue), which is where part of this new Cold War is being processed. This armed group takes up with another name Barack Obama’s doctrine of the Asian Pivot, which implied the transfer of diplomacy, security and economy to Asia and which Trump had despised when he came to power.

It is interesting to note that if there were no agreements at the APEC summit, the signs of a confrontational world multiplied instead. One of them was the U.S. decision, in agreement with Australia, to build a military base on the island of Manus in Papua New Guinea, the same site that during the Second World War was a strategic facility in the fight against Japan. That initiative blocked China’s plan to build a port on that same site as part of its extensive Silk Road. At the same time, the U.S. along with Japan, again Australia and New Zealand, organized a $1.7 billion package to provide electricity and internet to Papua New Guinea and prevent Beijing from spearheading this assistance.

Australia, which was the colonizer of that space in the past, has firmly aligned itself with Washington in the clash with the Asian giant. A fact of this behavior is the rejection that Canberra has just concretized of an investment of more than 13 billion dollars from a Hong Kong consortium to finance the construction of a gas pipeline. The argument was the preservation of national interests. For the same reasons, it has stopped the Chinese telecommunication companies Huawei and ZTE for the expansion of 5G telephony. A world at war… commercial.

Copyright Clarín, 2018.