The rules based economic disorder after Osaka G20

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The Osaka G20 summit may yet be remembered in history as the moment the global rules based order was lost. There was no mention of the rules-based order in the communique, signaling an edge towards rule by might rather than rules among the major powers. The uncertainty that has clouded the global economy over the past few years is child’s play compared with what could come now without a major effort by middle powers to avert catastrophe.

Leaders of the most powerful 20 countries in the world met last week in Osaka for their most important meeting since the leader’s summit was first convened to respond to the global financial crisis. Prime Minister Abe and the Japanese government found themselves at the helm of the global grouping at a time when multilateralism is under its biggest threat since the global multilateral regime was created after the second world war.

At stake is the future of the multilateral trading system and global economic cooperation. The current global hegemon is intent on tearing down the rules in the face of a rising power that is challenging its supremacy. The United States has gone from underwriting the order for the past 70 years to becoming its biggest threat. China’s rise was always going to be difficult to manage but US President Trump and Chinese President Xi are making it perilously close to impossible for the rest of us.

There appear to be no constraints on the populist backlash against globalisation in much of the advanced world that is threatening prosperity globally. The future of the multilateral trading system is in doubt as the enforcement of the inadequate though crucial WTO rules look to fall apart in December with the United States vetoing the appointment of judges to the appellate body of the dispute settlement system.

After recognising the need to update the WTO rules at the last G20 summit in Argentina only 7 months ago, the leaders in Osaka could barely manage lowest common denominator language in their Osaka communique that raises more doubt than confidence. Gone are the empty words copy and pasted into past communiques denouncing protectionism. The best that could be managed was a single watered down paragraph on trade that did not mention protectionism or multilateralism.

For a group that is essentially the steering committee for the global economy, there is no mention of the importance of markets in their long-winded and at times farcical communique. There is an America First paragraph shoe-horned in explaining the US disdain for the Paris Climate Accord. It’s difficult to know what to make of the other dozen or so pages.

There was some good news amongst the train wreck. There was a temporary truce in the escalating trade war between China and the United States. And Australian middle power diplomacy managed to broker a consensus statement to combat terrorist and extreme violent material online.

The most promising sign at Osaka was that countries like Indonesia took a proactive stance, standing up for their interests in multilateral trade. Indonesia’s efforts were frustrated by a…

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