G20 performance on trade
There are several proven, low-cost measures that can help G20 leaders increase compliance with their trade commitments, which, coupled with forward-thinking policies, will help the global economy towards recovery
The unprecedented impact of the COVID-19 pandemic on the global economy and trade requires strong leadership and coordination from the leaders at the G20 Riyadh Summit. Significant disruptions for businesses and global supply chains, combined with the rise in protectionism and trade tensions, have had significant negative effects on global trade and helped tip the global economy into a severe recession. It is of paramount importance for the G20 leaders to keep trade channels open, build resilience in global supply chains, and reaffirm their long-standing commitment to free and open trade. They also need to recommit to the rules-based multilateral trading system, with a reformed World Trade Organization at its core. This will produce an open and supportive environment for global economic recovery.
The G20 leaders have dedicated on average 1,042 words (9%) per summit to trade in their communiqués. Between 2008 and 2010, trade deliberation was between 439 and 1,000 words per summit. This rose to 1,329 words (9%) at Cannes in 2011, 1,033 (8%) at Los Cabos in 2012, 1,770 (6%) at St Petersburg in 2013 and 1,062 (12%) at Brisbane in 2014. It then dropped to a low of 897 words (6%) at Antalya in 2015. The highest number followed at Hangzhou in 2016 with 2,045 words (13%). This dropped again to 1,342 (4%) at Hamburg in 2017, to 787 (9%) at Buenos Aires in 2018 and to 463 (7%) at Osaka in 2019. This recent declining trend reflects rising protectionist tendencies and trade tensions.
G20 leaders have made 175 trade commitments, accounting for 7% of all commitments across all subjects. Trade ranks fourth, after macroeconomic policy, financial regulation and development. Thirty trade commitments were linked to development, seven to digitalisation and one to climate change.
The five commitments made at the 2008 Washington Summit were 5% of its total commitments. The number rose slowly to 17 (11%) at the 2010 Seoul Summit, as the leaders emphasised anti-protectionism in the wake of the 2008 global financial crisis, before turning to trade liberalisation and facilitation. The number peaked in 2016 and 2017 at 24 (11%) and 29 (5%) commitments respectively. In 2018, a low of five (4%) commitments were made. In 2019, six commitments (4%) were made, calling again for a free, fair, nondiscriminatory, transparent, predictable, stable trade environment and reform of the WTO.
The failure of the WTO’s Doha Development Round resulted in many bilateral and regional free trade agreements and the release of a stand-alone document at the 2013 St Petersburg Summit on Advancing Transparency in Regional Trade Agreements.
The G20 Research Group has assessed 23 trade commitments for compliance, finding an average of 67%. This is below the G20’s 71% average overall. The two summits with the highest compliance were the first 2008 Washington Summit at 90% and the 2016 Hangzhou Summit at 83%. The lowest were the 2013 St Petersburg Summit at 37% and the 2014 Brisbane Summit at 48%. Since the 2015 Antalya Summit, compliance on trade has never dropped below 79%.
By member, the highest compliers were Australia with 92%, the United Kingdom with 84% and Japan with 83%.
Causes and corrections
G20 leaders can use several proven, low-cost measures to increase compliance with their trade commitments. A higher number of words and commitments on trade correlates with higher compliance, the former by a little and the latter by a lot.
Holding a pre-summit trade ministers’ meeting correlates with increased compliance by 8%. On issue linkages, the commitments linking trade and development had very high compliance of 95%.
Some measures may decrease compliance. These include a reference in the commitment to a multiyear timetable (−16%), to a past summit (−8%), a one-year timetable (−3%) and the WTO (−3%). Commitments with higher politically binding language have compliance of 59% while those with lower politically binding language
G20 leaders should therefore include more words and commitments on trade in their official documents and continue holding pre-summit trade ministers’ meetings. They should avoid referring to a past summit, a one-year or a multi-year timetable and the WTO.
Leaders should also recognise the increasing interconnection between trade and issues such as e-commerce, fintech, development, gender equality and climate change. Open and fair trade will be an important instrument in the global recovery and will facilitate rebuilding smarter in the new age of digitalisation, realising the opportunities of the 21st century for all.