Slipping away? US-China trade deal appears elusive at G20 summit

If United States President Donald Trump and Chinese President Xi Jinping are headed for a grand bargain over their bilateral trade dispute, there was little sign of it on the first day of the G20 Summit in Osaka, Japan on Friday.

When the working lunch on “Growth, Investment and Trade” was held behind closed doors, the short briefing that an unnamed White House official gave to reporters suggested that the two sides remain far apart.

“The tone was largely positive from the various world leaders, [and] China was less positive,” the official said. “Just a more negative tone [from China].”

Trump and Xi are expected to meet on the sidelines of the summit on Saturday in what is likely to be the most keenly watched bilateral session of the two-day event.

“At a minimum, it will be productive,” Trump said of the meeting with Xi.

After meeting Brazilian leader Jair Bolsonaro, Trump gave no indication as to whether the US and China were any closer to a deal.

“We’ll see what happens tomorrow. It’ll be a very exciting day, I’m sure. It’s going to come out hopefully well for both countries,” Trump said.

The stakes are high. Trump more than doubled import tariffs on $200bn worth of Chinese goods to 25 percent in May. He has also threatened to impose tariffs on another $325bn of goods, covering nearly all the remaining Chinese imports into the US, including consumer products such as mobile phones, computers and clothing.

Beijing retaliated with increased tariffs on $60bn worth of US goods, and state media have raised the possibility that China could start holding back exports of so-called rare earth elements, which are crucial for a variety of electronic components.

Slowing world economy

Economists, including International Monetary Fund (IMF) Managing Director Christine Lagarde, have warned that global economic growth could suffer if the trade war is not resolved soon. Earlier this month, the IMF said current and threatened US-China tariffs could cut 2020 global gross domestic product (GDP) by 0.5 percent, or about $455bn – a loss larger than G20 member South Africa’s annual economic output.

Recent manufacturing data from China suggests the world’s second-biggest economy may already be slowing down.

The G20 is an international leaders’ forum consisting of 19 countries and the European Union. Collectively, this grouping represents more than 80 percent of the world’s economic output and two-thirds of its people. Its primary aim is to promote international financial stability.

Another thorn in the side of the US-China relationship is technology. The US wants China to stop forcing foreign companies to transfer technology in key areas such as artificial intelligence and telecommunications. It also wants it to curb subsidies to state-owned firms and grant foreign companies better access to Chinese markets.

The highest-profile victim of Trump’s moves in this area is Chinese technology giant Huawei, a leader in the latest 5G mobile phone technology. The US has barred American firms from selling Huawei’s key components, saying it is a threat to US national security.

While Huawei was not mentioned by name at the “Side-Event on Digital Economy,” there were clear references to the industry in which it operates.

Xi called for a “fair, just and non-discriminatory market environment” and added that “data to the digital economy is the same as oil to industrial economies”.

Trump struck a cautious note on the issue. “At the same time as we expand digital trade we must also ensure the resilience and security of our 5G network,” he said.

“This is clearly an exchange about the sanctions imposed against Huawei and some other Chinese hi-tech firms,” Daniel Sneider, a lecturer in international policy at Stanford University, told Al Jazeera. “Lifting those are a priority for Xi and the Chinese regime.”

The Trump administration has accused technology firm Huawei of engaging in spying on behalf of the Chinese government and engaging in industrial espionage. The US government has not only instituted its own ban on the use of Huawei technologies, but has been pressuring other nations to follow suit.

Silver linings

While no resolution of the US-China trade dispute appeared to be in sight, talks between the US and Japan bore more fruit. The two sides agreed to hold working-level meetings starting early next month to accelerate progress towards a trade agreement.

Trump has long argued that US trade agreements with allies like Japan – and not only with rivals like China – are unfairly weighted against his country.

“We share understanding of each other’s thinking and stance and where our gap lies. Based on that, we are discussing ways to narrow our differences,” Japan’s Minister for Economy, Trade and Industry, Toshimitsu Motegi, said after meeting US Trade Representative Robert Lighthizer on the sidelines of the summit.

Despite the very real tensions, there were plenty of smiles among the leaders.

At a trilateral meeting between Trump, Japanese Prime Minister Shinzo Abe, and Indian Prime Minister Narendra Modi, the three bumped fists instead of shaking hands. Abe described the grouping as “the foundation of peace and prosperity in the region”.

Earlier this month, India imposed higher tariffs on 28 US goods such as walnuts, almonds and apples.

That was in retaliation for Trump’s move to scrap Generalized System of Preferences trade privileges for India, the biggest beneficiary of a scheme that allowed duty-free exports of up to $5.6bn a year.

As for the upcoming US-India trade negotiation, Trump said: “It’ll be very positive … I think we will just continue to get along with India … I think we are going to have some very big things to announce. Very big trade deal.”

This was in stark contrast to Trump’s tweet the previous day stating that Indian tariffs on US products were “unacceptable”.

Mason Richey, a professor of international relations at Hankuk University of Foreign Studies in Seoul, said it was all part of Trump’s negotiating strategy.

“I think in some ways he’s perhaps playing good cop, bad cop with himself. He’s played bad cop with Japan and India on security issues and on trade issues. And now he’s there playing up the positive side of the relationship, talking about how close the US relationship is with India and Japan,” Richey told Al Jazeera.

Eyes on Iran

But the other big source of concern for global stability is the worsening relationship between the US and Iran, which is not a G20 member and which was not represented at the gathering.

Tensions between the two countries have been on the rise since May 2018, when Trump pulled the US out of an international deal with Tehran giving it economic incentives to shut down its nuclear programme.

Crude oil prices surged last week after Iran shot down a US military drone. That followed attacks in recent weeks on oil tankers in the Strait of Hormuz, a crucial chokepoint for global oil shipments. And ratcheting up the stakes even further, Trump imposed sanctions on Iran’s Supreme Leader Ali Hosseini Khamenei and other top officials on Monday.

“We have a lot of time – there’s no rush [and] they can take their time. There is absolutely no time pressure. Hopefully in the end it’s going to work out. If it does, great, if it doesn’t, you’ll be hearing about it,” Trump said.

Meanwhile, following a frosty reception at last year’s G20 Summit in Buenos Aires, Saudi Crown Prince Mohammed bin Salman, also known as MBS, was warmly welcomed.

This was despite a report presented earlier in the week by Agnes Callamard, the United Nations special rapporteur on extrajudicial executions, saying MBS and other senior officials should be investigated for the murder of Saudi journalist Jamal Khashoggi in Saudi Arabia’s consulate in Istanbul last year.

Russian President Vladimir Putin was also made to feel at home, with Trump jokingly asking him in front of journalists not to “meddle” in US elections.

US intelligence agencies have concluded that Russia attempted to influence the 2016 US presidential race. President Trump has been reluctant, however, to accept the conclusions of his government’s intelligence agencies.

On issues such as World Trade Organization (WTO) reform, there was broad agreement that advances needed to be made. For example, India’s Modi told a meeting of leaders from Brazil, Russia, China and South Africa, “We should still focus on the WTO reform to achieve balanced development of the global economy and so this growth is open to everyone.”

The establishment of a more robust framework for international trade under the WTO could go a long way toward advancing the cause of global economic stability, one of the key purposes of the G20.