.
With the Hamburg G20 Summit concluded, the rifts dividing the U.S. and other G20 members have become painfully clear. In the lead-up to the summit, German Chancellor and G20 Chairwoman Angela Merkel addressed the widely-publicized divisions within the group, referring to "a whole series of thorny issues." Merkel’s words proved prophetic: despite superficial trade compromises and proclamations of progress, the official communiqué largely rehashes the aims and language of previous summits.
Meanwhile, climate change, arguably one of the most pressing threats faced by the international community, was one of the most divisive topics of this year’s G20 agenda. Trump’s views on climate change and environmental policy, and support for the fossil fuel industry, stand in stark contrast to mainstream G20 positions. Trump now faces the reality of his “America First” ethos, finding himself isolated and friendless after an extraordinary joint statement from the 19 other members of the G20 who defiantly reaffirmed their commitment to the “irreversible” Paris Accords.
Signs of Trump’s international alienation have been apparent since his presidential tour, with his contrarian views on climate change dumbfounding fellow world leaders at the Sicily G7 Summit and his speech to Brussels in NATO blasting the underpinnings of the Western security framework. That trend continued in the lead-up to the Hamburg Summit, when the German delegation failed to circulate a draft communiqué and blamed the incompatibility of U.S. policies with fundamental G20 positions. Trump and his advisors, for their part, doubled down by hinting at a tariff on major steel exporters, risking a trade war pitting the U.S. against not only China but also the EU, Germany, Canada, Japan, Mexico and the UK—that is to say, just about all of its most important trading partners.
Rifts between G20 members are obviously quite common, but the stakes at this year’s summit were significantly higher than usual. Trump’s “America First” agenda marks a fundamental departure from historic support for globalization and free trade, undermining long-standing pillars of the international system.
Yet even as commentators and policymakers rightfully lament Washington’s retreat on issues of global importance, it’s worth acknowledging that the one other participant which is changing as rapidly and as radically as the U.S. has gone in the opposite direction and reinvested in core G20 positions. Saudi Arabia, one of the world’s most thoroughly state-dominated economies and notable in its royal absence from the meeting, has been accepting points key to the G20’s economic agenda, embracing market reforms in the hopes that its one-track oil economy can be fundamentally changed to meet the needs of a young, demanding populace in a post-oil world. Recognizing the significance of this shift, other G20 partners have been providing support for the reform campaign, even if not always in the context of more formal gatherings.
King Salman cancelled plans to attend the summit over the dispute with Qatar, but he did undertake a month-long regional tour of Asia earlier this year—his first outside the region since 2015—in an aim to deepen existing ties and promote new investment opportunities in the kingdom, including the sale of a stake in national oil giant Saudi Aramco. In China, the king oversaw the signing of deals worth as much as $65 billion, including a MOU to examine building refining and chemical plants in China. The trip was also a prelude for new initiatives, including a potential China-Gulf Cooperation Council free trade deal, plans to expand Belt and Road projects in the Gulf, and schemes to involve Chinese companies in Saudi efforts to develop non-oil industries.
In Tokyo, meanwhile, the king’s visit built on an initiative launched in October with Japan’s SoftBank Group to create a tech investment fund worth up to $100 billion (a fund Donald Trump happens to be a fan of). The latest trip—the first by a Saudi monarch in 46 years—resulted in bilateral agreements to improve the business and investment environments in Saudi Arabia. The Saudi delegation also used both legs of the trip to sell the benefits of listing a portion of Aramco.
This commercial diplomacy is the brainchild of Crown Prince Mohammed bin Salman, who has been spearheading a reform drive known as Vision 2030. The plan is meant to reduce the country’s addiction to oil revenues and modernize its economy after the fall in oil prices dealt a major blow to the national budget. For outside partners like China and Japan, this obviously represents new business opportunities, but to the broader global economy, it represents a belated admission that Saudi Arabia’s statist, highly-controlled economic model is simply no longer sustainable. When oil prices were high, the country’s rulers could rely on largesse to provide for the material needs of the populace and skirt difficult reforms. With prices having cratered since, the king’s son seems to have decided the old model needs to be done away with.
Within the G20, there has been no partner more effusive about helping him in that task than the United Kingdom. Desperately in need of new economic partnerships as her country exits the EU, Prime Minister Theresa May has been driving efforts to expand the UK’s relationship with Saudi Arabia, travelling to Riyadh and laying the groundwork for what she hopes will be a speedy free trade agreement with the GCC. Her government has also been hard at work trying to land the Saudi Aramco listing, with regulators revealing plans just this week that would make it easier for state-owned enterprises (i.e. Aramco) to list on the London Stock Exchange.
All of this, of course, draws a stark contrast with the U.S.—which looks set to draw up ever-stronger barricades of protectionism under President Trump. It’s hard to predict what the global economy will look like by the end of Trump’s term in office, but the G20 has decided it will have a close look at how far the Saudis have gotten in a few years’ time: in Hamburg, they decided King Salman’s country would host the 2020 summit.
Photo: Wikimedia Commons.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
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Shifting Roles at a Divided G20
July 14, 2017
With the Hamburg G20 Summit concluded, the rifts dividing the U.S. and other G20 members have become painfully clear. In the lead-up to the summit, German Chancellor and G20 Chairwoman Angela Merkel addressed the widely-publicized divisions within the group, referring to "a whole series of thorny issues." Merkel’s words proved prophetic: despite superficial trade compromises and proclamations of progress, the official communiqué largely rehashes the aims and language of previous summits.
Meanwhile, climate change, arguably one of the most pressing threats faced by the international community, was one of the most divisive topics of this year’s G20 agenda. Trump’s views on climate change and environmental policy, and support for the fossil fuel industry, stand in stark contrast to mainstream G20 positions. Trump now faces the reality of his “America First” ethos, finding himself isolated and friendless after an extraordinary joint statement from the 19 other members of the G20 who defiantly reaffirmed their commitment to the “irreversible” Paris Accords.
Signs of Trump’s international alienation have been apparent since his presidential tour, with his contrarian views on climate change dumbfounding fellow world leaders at the Sicily G7 Summit and his speech to Brussels in NATO blasting the underpinnings of the Western security framework. That trend continued in the lead-up to the Hamburg Summit, when the German delegation failed to circulate a draft communiqué and blamed the incompatibility of U.S. policies with fundamental G20 positions. Trump and his advisors, for their part, doubled down by hinting at a tariff on major steel exporters, risking a trade war pitting the U.S. against not only China but also the EU, Germany, Canada, Japan, Mexico and the UK—that is to say, just about all of its most important trading partners.
Rifts between G20 members are obviously quite common, but the stakes at this year’s summit were significantly higher than usual. Trump’s “America First” agenda marks a fundamental departure from historic support for globalization and free trade, undermining long-standing pillars of the international system.
Yet even as commentators and policymakers rightfully lament Washington’s retreat on issues of global importance, it’s worth acknowledging that the one other participant which is changing as rapidly and as radically as the U.S. has gone in the opposite direction and reinvested in core G20 positions. Saudi Arabia, one of the world’s most thoroughly state-dominated economies and notable in its royal absence from the meeting, has been accepting points key to the G20’s economic agenda, embracing market reforms in the hopes that its one-track oil economy can be fundamentally changed to meet the needs of a young, demanding populace in a post-oil world. Recognizing the significance of this shift, other G20 partners have been providing support for the reform campaign, even if not always in the context of more formal gatherings.
King Salman cancelled plans to attend the summit over the dispute with Qatar, but he did undertake a month-long regional tour of Asia earlier this year—his first outside the region since 2015—in an aim to deepen existing ties and promote new investment opportunities in the kingdom, including the sale of a stake in national oil giant Saudi Aramco. In China, the king oversaw the signing of deals worth as much as $65 billion, including a MOU to examine building refining and chemical plants in China. The trip was also a prelude for new initiatives, including a potential China-Gulf Cooperation Council free trade deal, plans to expand Belt and Road projects in the Gulf, and schemes to involve Chinese companies in Saudi efforts to develop non-oil industries.
In Tokyo, meanwhile, the king’s visit built on an initiative launched in October with Japan’s SoftBank Group to create a tech investment fund worth up to $100 billion (a fund Donald Trump happens to be a fan of). The latest trip—the first by a Saudi monarch in 46 years—resulted in bilateral agreements to improve the business and investment environments in Saudi Arabia. The Saudi delegation also used both legs of the trip to sell the benefits of listing a portion of Aramco.
This commercial diplomacy is the brainchild of Crown Prince Mohammed bin Salman, who has been spearheading a reform drive known as Vision 2030. The plan is meant to reduce the country’s addiction to oil revenues and modernize its economy after the fall in oil prices dealt a major blow to the national budget. For outside partners like China and Japan, this obviously represents new business opportunities, but to the broader global economy, it represents a belated admission that Saudi Arabia’s statist, highly-controlled economic model is simply no longer sustainable. When oil prices were high, the country’s rulers could rely on largesse to provide for the material needs of the populace and skirt difficult reforms. With prices having cratered since, the king’s son seems to have decided the old model needs to be done away with.
Within the G20, there has been no partner more effusive about helping him in that task than the United Kingdom. Desperately in need of new economic partnerships as her country exits the EU, Prime Minister Theresa May has been driving efforts to expand the UK’s relationship with Saudi Arabia, travelling to Riyadh and laying the groundwork for what she hopes will be a speedy free trade agreement with the GCC. Her government has also been hard at work trying to land the Saudi Aramco listing, with regulators revealing plans just this week that would make it easier for state-owned enterprises (i.e. Aramco) to list on the London Stock Exchange.
All of this, of course, draws a stark contrast with the U.S.—which looks set to draw up ever-stronger barricades of protectionism under President Trump. It’s hard to predict what the global economy will look like by the end of Trump’s term in office, but the G20 has decided it will have a close look at how far the Saudis have gotten in a few years’ time: in Hamburg, they decided King Salman’s country would host the 2020 summit.
Photo: Wikimedia Commons.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
