Trade

POLITICO Pro G20 Report, presented by Demosistō: China ceasefire — Climate counterattack — Mercosur

POLITICO Pro G20 Report
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By JAKOB HANKE, DOUG PALMER and WENDY WU

With help from Anita Kumar, Kristin Huang, Catherine Wong and Liu Zhen.

SNEAK PEEK

U.S. President Donald Trump avoided an escalation of the tariff war with China, and even said he would relax restrictions on U.S. companies selling to telecoms giant Huawei.

Europe and China hit back against Trumps attempts to further undermine the Paris climate agreement, and ensured that the U.S. was the only country opting out in the final communiqué.

The EU paraded its biggest trade deal, struck with South America on Friday night.

DISASTER AVERTED IN OSAKA: Phew, the hurricane missed our little, global village at the G20 this time, but it doesnt feel like itll be too long before the storm clouds gather again. We avoided a worsening of the U.S.-China trade war, and U.S. President Donald Trump failed in an attempt to further undermine the Paris agreement on climate change, after pushback from the EU and China. But these are small victories.

While leaders averted a meltdown, they failed to move forward. On climate change, the G20 stuck to promises made two years ago and failed to advance concrete carbon reduction targets. On WTO reform, leaders failed to agree meaningful proposals to tackle subsidies or save the all-important arbitration body in Geneva that seems set to collapse at the end of the year, with Washington blocking the appointment of judges.

Catching up with Kim: Before jetting off to the Korean peninsula, Trump issued a surreal Twitter invitation to North Korean leader Kim Jong Un that they should meet up for an impromptu summit on the Demilitarized Zone to shake hands and say “hello.” Its only a matter of time before these two start playing golf together. Still, Trump will have to hope Kim Jr. isnt as good as his father, who (according to ever-reliable North Korean state media) scored 11 holes-in-one the first time he picked up a club.

Sayonara: That, alas, is it from your team from POLITICO Europe, POLITICO and the South China Morning Post. Weve certainly enjoyed it. See you again soon.

DRIVING THE DAY

PEACE, FOR NOW: Negotiations aimed at resolving a damaging trade war between the worlds two largest economies are “right back on track,” Trump declared Saturday after a meeting with Chinese President Xi Jinping. The talks had been on hold for nearly two months after Trump accused the Chinese of changing their mind about some things they had previously committed to do.

Trump told reporters that a 25 percent tariff on $250 billion worth of Chinese goods would stay in place. But he agreed in the meeting with Xi that he would not impose a 25 percent duty on another $300 billion worth of Chinese goods, as he previously intended to do. For its part, China agreed to step up purchases of U.S. farm goods and other products. Trump didnt mention any specific volume of purchases, but said the U.S. side would give China a list of goods to buy.

Leeway for Huawei: In one potentially controversial area, Trump said he wanted to loosen a trade ban that was recently imposed on Chinese telecommunications giant Huawei because of national security concerns.

Trump indicated he thought the ban was too restrictive because Huawei is a major customer for many U.S. technology firms. “We send and we sell to Huawei a tremendous amount of product that goes into the various things they make,” Trump said. In another area, Trump indicated he wanted to reform immigration policy to make it easier for Chinese students to work and stay in the United States after they complete their education.

Xi sounded happy. In an official sounding way: He cited the “ping-pong diplomacy” that began at the 1971 world table tennis games in Nagoya, Japan, and eventually led to a normalization of relations between Washington and Beijing. “China and the United States both benefit from cooperation and lose in a confrontation. Cooperation is better than friction, and dialogue is better than confrontation,” Xi said.

TRUMP CALLS PELOSI ON USMCA: Trump had other world leaders to talk to over the past several days. But he took time out of his schedule Friday night in Osaka to make a phone call to the person who holds the fate of the U.S.-Mexico-Canada Agreement in her hands: House Speaker Nancy Pelosi. “I said, view this as a bipartisan deal because a lot of the Democrats want it,” Trump said at his press conference.

Trump did not indicate whether he plans to formally submit implementing legislation for USMCA in coming days. Democrats have said that would be premature because of concerns they have about labor, environment, pharmaceutical and enforcement provisions of the pact. Trump did express confidence Congress would pass the agreement. “I think youll get a great vote” in both the House and the Senate, he said.

A message from Demosistō: As you are reading this, the Trump-Xi meeting in Osaka is already over and businesses worldwide are evaluating its influence for them. In the past two decades, Hong Kong has weathered multiple crises and remained as a world financial center — but will this success story prevail?

DIPLOMATIC FLOPS

TRUDEAU RAISES ISSUE OF DETAINED CANADIANS WITH XI: Canadian Prime Minister Justin Trudeau gets an A for effort but it doesnt appear he made any headway with Xi in securing the release of two Canadians imprisoned in Canada. Interactions between the two leaders during the G20 could politely be called “cold.”

The contact between the two was the first since diplomatic and trade relations turned sour last December when Canadian police arrested Chinese telecom giant Huaweis Chief Financial Officer Sabrina Meng Wanzhou on a U.S. extradition warrant and Chinese authorities arrested two Canadians on “national security” charges.

Kill the chicken, scare the monkey: China has charged Michael Kovrig and Michael Spavor with spying, a move widely seen by those outside China as retaliation for Mengs arrest.

Beijing could not afford to hit back against the real target, Trump, so it struck against a proxy.

“You can rest assured that the case of Canadians detained in China is something we will continue seriously,” Trudeau said in a press briefing after the G20 summit concluded.

Lost in translation: Despite Trudeaus claim to have had “constructive conversations” with Xi, video footage of the G20 summit appeared to show frosty interactions between the two. During the Leaders Working Lunch on Friday, Trudeau and Xi did not shake hands or look at each other, even though the two sat next to each other thanks to alphabetical seating.

Canadian reports said there was no interaction because Xis translator was not with him. In the evening, just before the culture performance was about to start, Trudeau and Xi were seen talking briefly with each other.

BRASSED-OFF BRAZILIANS: Bloomberg reports that things went even worse with Brazilian President Jair Bolsonaro, who called off a meeting on Saturday in Japan with Chinese counterpart Xi Jinping after his delegation was left waiting.

CLIMATE CLASH

THE CLIMATE LEVEES HOLD: It went down to the wire, but Europe and China fought off a big push by Trump to water down global climate ambitions. The U.S. had wanted Brazil, Australia, Turkey and Saudi Arabia to join Washington in rowing back on the Paris climate accord. In the end the G20 was reduced, yet again, to the 19+1 format, in which the U.S. kept a special carve-out.

Two senior EU negotiators said they had fought with the United States over the climate chapter until 4 a.m. on Saturday, when they decided to pause talks as they saw no way out of the deadlock. Around 11 a.m., things started moving again as sherpas handed over the baton to heads of state, who agreed to back the 19+1′ format.

French fury: French President Emmanuel Macron was far from happy about Trumps attempts at sabotage. “We [the G20] are increasingly disconnected from the rest of the world … Our scientists every day remind us of our duty in matters of climate change and biodiversity, our youth every week in France and many countries remind us of our duty, while we at the G20 continue having debates on whether we can still cite the Paris agreement.”

Macron also questioned the value of G20 meetings, considering the “carbon footprint” that comes along with sending thousands of people across the world and said that alternative forums such as the U.N. and regional alliances might be better suited to circumvent a U.S. blockade.

Green allies: Europes tussle against the U.S. was helped by the fact that the Chinese, for whom pollution is a hugely sensitive political issue, rallied to the climate call. Chinas Foreign Minister Wang Yi and his French counterpart Jean-Yves Le Drian said they “agreed on the importance for all countries to fully fulfil their commitments in the UNFCCC and the Paris Agreement to the letter,” in a statement. Both countries promised to increase their emission reduction targets and said they would “publish their long-term mid-century low greenhouse gas emissions development strategies by 2020.”

EUROPE-SOUTH AMERICA

MEGA TRADE DEAL: The Europeans in Japan were keen to parade their newly minted trade deal — their biggest — with the Mercosur bloc of Brazil, Argentina, Paraguay and Uruguay. The “Mercosaurus” finally hatched on Friday night in Brussels, after 20 years of start-stop talks. Heres a video of the big moment.

Liberals glowing and gloating: The deal certainly gave the EU bragging rights in Osaka, allowing the proponents of multilateralism to shout “in your face” to Trump and his tariffs as well as to Russian President Vladimir Putins warnings about the end of liberalism. A press conference initially billed as a joint appearance by European Commission President Jean-Claude Juncker and Argentine President Mauricio Macri instead turned into a victory party with all the EU leaders arrayed on stage, even U.K. Prime Minister Theresa May.

A historic moment: “I like to use words a bit carefully, but this is a truly historic moment — this agreement has been two decades in the making,” Juncker declared. “This deal is a real message in support of open, fair, sustainable and rules-based trade, because trade creates good jobs for all concerned,” he continued. “It shows that in these turbulent moments agreements can be reached. Mutually beneficial compromises can be found.”

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