The leaders taking part in the G20 summit went their separate ways on Saturday 8 July having secured a compromise on the sensitive issues on the table but at a cost of unabashedly having to display their differences.
Climate. The sherpas worked until the wee small hours of Saturday morning without managing to agree on the climate section of the final statement. The leaders picked up the baton and worked until midday, ultimately conceding to the demand from the US administration: the inclusion of a paragraph specifically devoted to the United States, underlining its desire to promote fossil fuels.
The final statement takes note of the American decision to withdraw from the Paris Agreement and indicates that the USA “states it will endeavour to work closely with other countries to help them access and use fossil fuels more cleanly and efficiently”.
“There is a critical mass of countries that are unhappy with the mention” of “dirty” energy, said a European source on Saturday morning. That, however, was the price of a unanimous statement in which the 19 other delegations reaffirm their commitment to implementing the Paris Agreement, which they state to be “irreversible”.
“Where there is no consensus, the difference has to be expressed in the statement”, said German Chancellor Angela Merkel who chaired the meeting.
A further shadow was cast when Turkish President Recep Tayyip Erdoğan also threatened not to implement the Paris Agreement just after the G20.
“After this step taken by the United States, our position is heading towards non-ratification by the parliament”, the Turkish leader said. He added, without naming any, that other countries also had doubts. Turkey is afraid that the assurances it has received that it will not be required to contribute to the fund that will be set up to finance the Paris Agreement by developing countries will not be respected.
As if to present a united front, French President Emmanuel Macron thereafter announced that another climate summit would be held on 12 December “to take further climate action, including financial”. He spoke of the need to “substantially raise the CO2 price in Europe, but to do so in coordination with our partners”, so as to shift energy production.
It is worth noting that the new climate summit announced by Macron will take place on the date of the second anniversary of the Paris Agreement which was concluded on 12 December 2015 (see EUROPE 11452) and less than a month after COP23 (to be chaired by Fiji in Bonn, 6-17 November) at which the implementation of all the provisions of the Paris Agreement, including the financing, will be discussed.
Macron said, too, that it was his “duty” as a leader to try to persuade the US president to reverse his decision to leave the Paris Agreement. UK Prime Minister Theresa May will also try persuade Donald Trump to change his mind.
Trade. A further area of difficulty at this summit that attracted widespread demonstrations in the streets of Hamburg was global trade. Nineteen delegations wanted to affirm their desire to fight protectionism while the US administration does not seek to conceal its protectionist leanings. The G20 leaders state that they will keep markets open but note the “importance of reciprocal and mutually advantageous trade and investment frameworks”. The G20 pledges to continue to fight protectionism “including all unfair trade practices and recognise the role of legitimate trade defence instruments in this regard”. The American delegation was successful in obtaining a commitment to reform the World Trade Organisation. The G20 remains guarded on this point and gives no indication of how.
On the sidelines of the meeting, the EU and Canada agreed that their bilateral trade agreement, CETA, would come into force provisionally on 21 September (see other article). The EU and Australia also pledged to speed up negotiations on an agreement.
Overcapacity in the steel sector. The US administration made the removal of its reservation on the section of the statement dealing with trade conditional on definite, operational commitments on addressing global over capacity in steel production, with cheap Chinese steel being the target. Despite the reduction measures taken by China, its production continued to increase in 2016.
To protect the American industry, the Trump administration has already threatened to bring in customs duties or quotas for steel, a prospect immediately condemned by the EU. European Commission President Jean-Claude Juncker warned on Friday morning that it would take the EU only a matter of days to react to any potential American announcement.
The G20 called on the Global Forum on Steel Excess Capacity which it set up last September to come up with “policy solutions” for reducing overcapacity by November. The said solutions are to provide the basis for “tangible and swift policy action” and follow-up progress reporting in 2018.
Asked about a possible trade war with the United States, Angela Merkel replied that “that is an issue which will remain on the table”. She also highlighted the tight timetable, since countries have to exchange information as early as next month. For the EU, the firm tone adopted by the G20 on steel is a good result, a European source said on Saturday morning.
Migration. European Council President Donald Tusk made clear from the moment of his arrival at the G20 on Friday morning that he would call for UN sanctions against traffickers who smuggle people from Libya to Italy in small vessels.
As M. Tusk expected (see EUROPE 11825), some countries – Russia and China, according to information received – blocked this step. The final agreement is “vague”, railed a European source on Saturday. Nevertheless, this is only the first stage, as the G20 has never before addressed the issue of people smuggling.
The final text states that the leaders commit to countering migrant smuggling and trafficking in human beings and are determined to take action against people smugglers and traffickers.
Banks. The G20 will work to finalise the strengthening of international rules setting bank capital requirements (Basel III). It uses the language often employed in press releases from European ministries of finance. The work will have to be done “without further significantly increasing overall capital requirements” across the banking sector, while promoting “a level playing field”. At the end of August last year, the European industry warned against a reform that would be excessively expensive for European banks, quantified at up to €860 billion in optimal capital. At the June meeting of the Basel Committee (see EUROPE 11810), no agreement was reached on revising minimum own funds requirement levels (“output floors”).
Taxation. With some doubts being expressed alongside American enthusiasm, the G20 leaders pledged to implement the OECD measures tackling tax base erosion of profit shifting (BEPS). The EDU has already incorporated most of the BEPS measures into EU law.
As called for by the EU, mention was made of the tax challenges raised by digitalisation of the economy and work currently being done on this issue by the OECD (see EUROPE 11823). At EU level, the Estonian Presidency of the Council also intends to work on this matter, using the Commission proposal on a common consolidated corporate tax base (CCCTB) (see EUROPE 11819).
Lastly, while the OECD has not recommended including Trinidad and Tobago on the black list of tax havens, the small West Indian republic has finally been nabbed as is has been unable to demonstrate that it has made sufficient progress. The G20 said it looked forward to an updated list in the light of commitments made on tax transparency. “Defensive measures will be considered against listed jurisdictions”, it stated.
Russian-American agreement on ceasefire in south-west of Syria. Following a first one-to-one meeting between the presidents of Russia and the United States, Vladimir Putin and Donald Trump, agreement between the parties was announced on a ceasefire in the south-west of Syria, with effect from midday on Sunday, local time.
See final G20 communique: http://bit.ly/2tXNPKy
(Original version in French by Élodie Lamer with Aminata Niang)