Trade

POLITICO Pro G20 Report, presented by Demosistō: Trump-Xi Redux — EU eyes big deal — Abe frets

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

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

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SNEAK PEEK

The G20 final communiqué is at risk as the EU and U.S. fight about climate change. More countries could join the U.S. opposition to the Paris agreement, officials told us.

A long-awaited meeting on Saturday between President Donald Trump and Chinese President Xi Jinping will seek to cool the trade war.

Japanese Prime Minister Shinzō Abe expressed “grave concern” about world trade and called for renewed efforts to reform the WTO.

HELLO AGAIN, WERE HALFWAY DONE IN OSAKA! Welcome back to your daily G20 Report, with your joint team from POLITICO Europe, POLITICO and the South China Morning Post. Amid all the geopolitical saber-rattling here in Japan, there is at least one great innovation to report from the land that also gave us the Walkman and the Playstation. Ever get tired of your plate being swiped at buffets? Well, we have an answer to dinner disorder. Here in Osaka, reporters are escorted to their tables by women in kimonos after an elegantly dressed gentleman has found them a seat. Then, you are given a card that says “Still Eating” on one side and “Finished” on the back. I wont tell you how long my “Still Eating” sign was up at lunch today. But by tomorrow, Ill cheerfully be wearing the “Finished” sign on my back.

DRIVING THE DAY

AGE OF FRAGMENTATION: The big picture emerging in Osaka is severe discordance, on everything from climate change to the relevance of liberalism. A decade ago, tight co-ordination in the G20 stopped the world economy cracking up in the financial crisis, but this summit is now fast becoming the stage on which geopolitical and commercial tensions boil over, and nobody seems able to pick up the pieces. U.S. President Donald Trump is pushing back against the idea that a tariff ceasefire with China is in the bag, Japan is expressing grave concern over global trade spats, and Russias President Vladimir Putin even used a Financial Times interview to sound the death knell for liberalism.

Lonely liberals: That leaves the Europeans waging an increasingly lonely campaign to keep the battle against climate change at the heart of the G20 agenda, against an onslaught from the U.S., which is seeking to find allies in Brazil, Turkey, Saudi Arabia and Australia. As our colleague David Herszenhorn put it in his alarming account of where we are this morning: things havent looked like such “globalized, gobsmacking mess” for quite some time.

In an extraordinary sign of exactly where we are, EU Council President Donald Tusk, a former campaigner against Communist rule in Poland, retorted to Putin: “Whoever claims that liberal democracy is obsolete, also claims that freedoms are obsolete, that the rule of law is obsolete and that human rights are obsolete.” The EUs trump card (on the liberal, free-trading side) may be to announce that it has struck a deal (its biggest) with leading South American economies.

Ha, ha, Ras-putin: Trump, by contrast, has been exchanging laughs with Putin over election meddling. After a reporter asked Trump whether he would talk to Putin about election interference, Trump responded: “Yes, of course I will.”

Then he turned to Putin, smiling and pointing his finger in the Russian presidents direction, saying: “Dont meddle in the election, president…Dont meddle in the election.” Putin, after hearing the translation, laughed.

A message from Demosistō: Leaders from the G20 group gather today in Osaka, Japan, to discuss important themes such as global economy, sustainability, and trade. For years, Hong Kong has been taking pride in being ranked as the worlds freest economy. However, its record of democracy and human rights have been growing grimmer in recent years.

TRUMP-XI

DECISION DAY FOR XI AND TRUMP: The most highly-anticipated meeting of the G20 summit feels like a summer rerun. Almost seven months after they last met in Buenos Aires, the world is again waiting to see whether Presidents Donald Trump and Xi Jinping will agree to a temporary truce in their trade war.

Trump told reporters on Friday that he had not already promised China to hold off on more tariffs for six months. But he appeared optimistic about the meeting. “Itll be a very exciting day Im sure,” Trump said. “Its going to come out hopefully well for both countries.” U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He met Friday evening to set the stage for the Xi-Trump meeting.

When our co-stars last met, it was over a dinner of grilled sirloin steaks paired with a Malbec from the Argentine winery Catena Zapata. Trump agreed not to raise duties on $200 billion worth of Chinese goods to 25 percent, from 10 percent at the time, to create space for the two sides to strike a historic trade deal. In the weeks that followed, Chinas state-run companies resumed purchases of U.S. agricultural goods — although nowhere near pre-trade war levels.

By the beginning of May, things were unraveling. Trump accused China of backtracking in the negotiations and then belatedly made good on his threat to raise duties on the $200 billion. To increase pressure, he began steps to impose a 25 percent duty on another $300 billion worth of Chinese goods, which (combined with an initial $250 billion) would raise the total to $550 billion.

Mixed signals: At the family photo shoot on Friday, Xi walked directly to Trump and shook his hand before going to his own place. He didnt talk to anyone else. The two leaders spoke on the phone on June 18 for the first time since December 29. That may sound encouraging, but China has also been carefully managing public expectations on the outcome of the Trump-Xi meeting since a deal to end the trade war was not reached at their last meeting in December. The vague phrasing of Chinese press statements about the meeting is intended to deliver the message that China pins low hope on Saturdays meeting to protect the images of XI and the ruling of the Communist Party if the meeting is deemed a failure.

SENIOR CHINESE OFFICIAL SLAMS BULLYING TRUMP: A Chinese official took aim at Trumps trade policy, saying that Xis meeting with several African leaders has “sent a new strong message in upholding multilateralism.”

“The rise of unilateralism, protectionism, and bullying practices poses a severe threat to economic globalization and the international order and a severe challenge to the external environment of developing countries,” said Dai Bing, director general of the department of African affairs of the Chinese foreign ministry.

XI SEEKS SUPPORT FROM PUTIN, MODI AGAINST US: Following a meeting with Putin and Indias Narendra Modi, Xi said China, Russia and India should work together to fight protectionism and protect the “fundamental and long-term interests” they share. Whoever could he be referring to there? Xi also called for Putin and Modis support in the growing tech war with the U.S., urging co-operation in emerging market 5G deployment but he dodged criticism in India that China is protecting Pakistan, saying the three nations should combat terrorism together.

EUROPE

THE OLD EMPIRE STRIKES BACK: The Europeans, who are thoroughly fed up with being upstaged by the Trump-Xi palaver, might just have a trick up their sleeve. The messaging from Brussels is that the EU, the worlds biggest trade bloc, could well strike a political agreement with the Mercosur grouping of Brazil, Argentina, Uruguay and Paraguay on Friday. Or at least it will be clear whether they are able to strike and accord or not.

If all goes according to plan, there could then be a big celebration in Osaka. In terms of tariff reductions, this would be the EUs biggest deal, and you can be confident that the EU will not waste any time parading their liberal, free-trading agenda before Trump. Still, expect French President Emmanuel Macron to be somewhat defensive about it. Hes going to have some tough questions about the effect of all that Argentine prime beef coming to Europe, and about the shaky green credentials of Brazilian President Jair Bolsonaro, as deforestation hits a record high.

RED LINE ON CLIMATE: Speaking about green credentials, the EU is facing an uphill battle to maintain a united front at the G20 on climate change. Under pressure from Washington, several countries including Saudi Arabia, Brazil, Australia and Turkey have signaled they want to backtrack on commitments made in the years before, three senior officials told POLITICO.

Such a backtrack would be “unacceptable” to the EU, one said. The Commission plus France, Germany, Spain, Italy as the countries represented in Osaka, met this morning to form a joint position and decided to endorse Macrons stance that any weakening of the language would be a red line, the three officials said.

Magic words: The communiqué must read that the Paris agreement is “irreversible” and that the G20 countries “fully commit” to implementing it, officials explained.

U.S. attack: At the G20s in Hamburg and Buenos Aires, Washington secured a carve-out from those magic words. But as a result of U.S. pressure, there is now a risk that other countries could join the U.S. camp.

Deadlock: The EU is trying to counter the U.S. pressure. Macron suggested the EU would not ratify the trade deal with Brazil if President Bolsonaro abandoned the Paris agreement. But as of Friday afternoon, sherpas were in a deadlock. The final communiqué was at risk, two officials from different EU countries told us.

Rather than weakening the language, the EU could begrudgingly accept that other countries join the U.S. carve-out. But they could also decide that the positions on climate change have grown too far apart. In any case, the chapter on climate will be the most difficult one, they said.

As Sherpas headed into their nightly round of negotiations one said that the chapter on climate change would have to be left for the heads of state to decide.

ASIA

ABE EXPRESSES “GRAVE CONCERN” OVER GLOBAL TRADE: Japanese Prime Minister Shinzō Abe, as chair of the G20 summit, urged leaders to redouble efforts to reform the World Trade Organization, which has been under increased strain from Trumps combative approach to trade policy.

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