What economists expect from G20 summit

What economists expect from G20 summit

The G20 leaders' summit will kick off on July 7 in Hamburg, the presidents of the Russian Federation and the US, Vladimir Putin and Donald Trump, are expected to hold a meeting on its sidelines. The talks at the G20 summit will be the first personal meeting between Putin and Trump. Meanwhile, the summit should be remembered for other events as well.

"The Trump administration has already said that the president at the meeting of G20 leaders will require measures to eliminate overproduction in the global steel market. If the G20 partners do not support him, he will impose a 20% duty on the import of steel. These measures of the US are quite obviously aimed, first of all, against China, as China accounts for half of the world's total steel production - 800 million tons from 1 billion 600 million tons, as well as against Germany," the head of the International Economic Organizations of the Center for Economic Research of the Russian Institute for Strategic Studies, Vyacheslav Holodkov, said.

According to him, the German side has already protested on this issue, while China has maintained a restrained position: "The Chinese said that they intend to reduce the excess capacity in the steel industry by 50 million tons this year. Trump's desire to limit steel imports is due to his election campaign. Trump's statement is intended to support American steel industry and, on the contrary, introduce additional obstacles to the import of steel".

Vyacheslav Kholodkov recalled that the deadline for reaching a final agreement on the reduction of the Chinese surplus and the US trade deficit expires in the second half of July: "If the parties fail to reach a definitive agreement, it is likely that new restrictive measures, including regarding the import of steel and not only steel. Aluminum, which is very widely used in construction, can also be limited".

Asked what position Russia should take in this situation, the expert said: "Russia's position is affected by several factors. First, if the US takes restrictive measures with regard to the import of steel and aluminum, Russia will suffer unconditional damage. Our bilateral trade with the US was $20.3 billion last year, of which $9.4 billion is our exports to the US. $2.6 billion of which account for ferrous and non-ferrous metals. It would seem that in general  it is not such a great loss for foreign trade, but the fact is that our economic growth is weak, so any blows will be very painful".

In addition, according to Kholodkov, attempts to enforce the slogan of balanced trade can provoke a chain reaction of similar measures with demands from other states: "Our country traditionally has a large positive balance. The thesis of balancing foreign trade is absolutely inappropriate for us. We cannot exclude the possibility of the deployment of universal trade wars and the compression of world trade in the case of the US using defensive import duties, which can provoke a slowdown and even recession of global economy. A recent review of the IMF called this scenario the main danger for the world economy. A decline in the global economy, in turn, is fraught with yet another sharp drop in oil prices. And, accordingly, a new crisis in our country".

The head of the department of economies of foreign countries at the Economic Research Center under the Russian Institute of Strategic Studies, Sergey Karataev, drew attention to the fact that 2017 is not only the tenth year of the G20's activity at the level of leaders, but the first year, when experts speak with some degree of confidence about overcoming the crisis and the rise of the world economy. "If you look at the last April report of the IMF, there is a revival of business activity in the world, and global growth should be 3.5% this year compared to 3.1% for 2016. For 2018, prospects are also optimistic - 3.6%, even we see a little more growth. And the allocated risks are moving away from the economic sphere, which is also quite new. The statement, timed to the beginning of Germany's presidency in the G20 in December last year, highlighted geopolitical conflicts, terrorism, migration, and climate changes. At the same time, in the conditions of improving global economy, some voices appear that call into question the need for the continued existence of the G20, which, in their opinion, was created to fight the crisis .The crisis was overcome, accordingly, the G20 allegedly did its job. Other experts question the possibility of reaching a compromise in the face of the new US foreign policy. The decisions of the G20 are taken by consensus, so if one side is against any terms or agreements, then the meeting is doomed to failure".

According to Karataev, there are certain grounds for such statements: "First of all, it is necessary to note the transition of the G20's activity to more routine work on the main directions, the issues of cooperation in the financial and economic spheres. That is, the tasks have not lost their relevance, but one can speak that they have moved to a more routine implementation of previously adopted decisions, their modifications, the identification and implementation of new directions. And it does not negate the importance of the solutions reached during the discussion in the course of the G20".

In addition, according to the expert, we have seen in recent years that new themes, which can become breakthrough, are suggested in the framework of the G20: "Last year, for example, it was green economy and finance, for the development of which it is expedient to introduce uniform global rules. Structural reforms designed to improve the effectiveness of fiscal and monetary policy measures. This year it is the digital economy and other topics".

Speaking about the Trump phenomenon, Karataev noted: "His policy was supported during the elections, and it is evidence that the world economy still has considerable distortions. On the other hand, the G20 has a new task that can be defined as providing support for the process of globalization. These issues can and should become new and additional goals for the work of the G20, which is a unique platform for interaction between representatives of both developed and developing countries, where they can coordinate their positions and seek compromises on most issues".

The expert drew attention to a fundamentally new architecture of relations between the G20 participants: "The split between the European countries and the US on the main issues is  quite evident, as well as certain support from the developing countries of Europe. It is important to prevent Trump's isolation and neglect of his positions due to such a division of positions. A reasonable compromise is needed. An alternative is to slide down to large-scale protectionist measures, which are already enough, new trade restrictions and, ultimately, to trade wars, which negate the results of the majority of G20 activities over the past decade". 

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Vestnik Kavkaza

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