G-20 SUMMIT HAS A TAME ENDING
By Subrata Majumber
G-20, which was set up with the global aspiration for economic security after two major financial crisis, Asian currency turmoil in 1997 and Lehman shock in 2008, seems to have lost its genie. The 11th G-20 Summit at Hangzhou city in China ended in a paradoxical situation. While a broad agreement was reached for coordinated approach towards macroeconomic policies, little headway was made in the concrete proposals.
Protectionism was univocally accepted the ill for the growth of world economic health. Innovation was the remedy to the Rejuvenation of the economy, and not just the financial and monetary policies, G-20 endorsed
Even though the main agenda of the summit was the health of global economy, attempting to curb the financial mess in the world, the summit was huddled with bilateral meetings , bemoaning the political and financial terrorism and lamenting the China’s intransigence to UNICLOS ruling for South China sea dispute.
India played a key role at the summit to let the global leaders aware of India specific problems, stemming from terrorism. It used the platform to step up attack on terrorism and the sponsor and vent ire on fueling black money, holding the banking institutions responsible for indulging in banking secrecy . Prime Minister Narendra Modi alluded Pakistan (without naming) as the single nation for triggering terrorism in South Asia.
He urged the G-20 members to eliminate the ‘safe heaven’ for economic offenders and reduce black money proliference, which was causing a great damage to the financial health of the emerging economics.
As anticipated, China, as the chairperson, failed to push up G-20 summit toward a bold action for global health of the economy. China observers felt that China was itself bogged down by its own economic pitfalls. The allegation against China’s industrial over-capacity in the summit, which caused misbalance in the global growth, put China into corner. After the slide in Chinese economic growth, China is engulfed with industrial over-capacity.
Before the summit meet, a big agenda was made for G-20 under the Presidency of China. In May, Chinese foreign Minister Wang Yi outlined an ambitious agenda for the summit. The main aim was to push the global economy with others. He suggested a blue print for innovative growth, involving innovations and digital growth. He urged for a cooperative initiatives for industrialization of Africa and least developed countries. To gear up international investment and security for the investors, he suggested multilateral investment rules, as 3500 bilateral agreements have divided the international trade. He wanted G-20 to act as a coordinated force to reduce the trade costs and increase trade financing , as it covers 80 percent of the global trade.
In the summit, industrial over-capacity became a hot debate. European Commission President Jean Claude Junker ranted the Chinese industrial over capacity, blaming it the cause for damage to its steel industry and resulting looses of several jobs in recent years. He vehemently opposed the China’s industrial over- capacity ‘unacceptable’. He said that China must set up a mechanism to address its problem of over-capacity.
It is not only European Union, but India too fell in the trap of Chinese industrial over capacity. Like European Union, Indian steel industry is in moribund stage. In 2015-16 and 2014-15, India’s steel import surged by 25.6 percent and 71.0 per cent respectively. This caused a damage to the domestic production of steel. India turned a dumping ground for China’s steel. Domestic finished steel production declined by 1.9 percent in 2015-16. Much of the damage was caused by gushing flow of Chinese steel. China is the biggest exporter of steel to India. It accounted for 24 percent of the total steel import in 2015-16. This led Indian government to put embargo over Chinese dumping of steel in India by various non-tariff barriers since September 2015.
Most Chinese observers were waiting for a new direction for economic policy reforms. They were expecting them to be announced by the end of current year or at the beginning of the next year. This was forecasted by Prof. Jefry Wilson of international political economy with Murdoch University in Australia. But, he feared that since China was unsure of its model of reform, there were little chances that China would use G-20 chairmanship to project the model abroad.
What were then the silver lining of 11th G-20 summit ? The G-20 called for a global forum to address steel excess capacity adjustment. Even though it did not discuss concrete steps to address the mismatch between excess capacity and demand in the world, this may prove boon to India.
Hitherto, India was under sever attack for its protectionism measures to the domestic steel industry. It was irony that EU, along with Japan, alleged India for its non-tariff barriers, which were not WTO reliant. India imposed safeguard duty on almost all finished steel for four years from September 2015 and MIP for eight months beginning from February 2016.
With the G-20 agreeing to a global forum for steel excess capacity adjustment, some solace may come to India with the hope that China may voluntarily restrain from aggressive selling of steel in India. It may leverage Indian steel companies to spin off a life for the dormant steel industry. However, at the same time , the bell of a strong global warning against protectionism will ring , which may hinder India to take restrictive measures in the trade.(IPA Service)