The G20 Trifecta
Germany – Argentina – Japan: Not a list of three regional soccer powerhouses, but rather the troika of past, current, and future presidency countries of the G20. On December 1, Berlin handed the baton to Buenos Aires, and for the next year the government of Argentine president Mauricio Macri will be in charge of organizing over 100 official meetings before turning the G20 leadership over to Tokyo at the end of 2018.
At a time of populist fervor marked by assertions of national sovereignty and skepticism of multilateral governance (from Brexit to stepped-up U.S. challenges to the WTO to election results across several European nations) these three countries are a kind of dream team of the open, rules-based global economy.
Angela Merkel, although weakened by the September election results and the breakdown of her initial coalition talks, has helped to make Germany and the EU a force for trade modernization and reform through the recently concluded free trade agreement with Canada and the ones being negotiated with Japan and four South American countries in Mercosur. Argentina under Macri has made a U-turn from its previous isolationist orientation, placing its “insertion in the world” at the top of its priorities—witness its hosting of the upcoming December 10-13 WTO ministerial or its ambition to join the OECD club of advanced economies. And by spearheading the revival of the Trans-Pacific Partnership (minus the U.S.) Japan’s prime minister Shinzo Abe would get high poll numbers in any contest for leader of the liberal international order.
The Argentine G20’s trade and investment focus will be twofold: “Global Value Chains and the Agricultural Sector,” and “The Fourth Industrial Revolution and Industry 4.0.” At the Hamburg G20 summit in July, trade became a contentious matter for the first time in the grouping’s history. Owing to efforts by the U.S. administration, the final communiqué’s traditional language about fighting protectionism was balanced with text supporting reciprocity in trade relations and the use of trade defense instruments (e.g., anti-dumping duties).
Given what are likely to continue to be hard-to-bridge differences on trade ideology (what do “free trade” or “fair trade” really mean?), the Macri government’s focus on two key aspects of trade reality is smart. Whether a country thinks it is a winner or loser from current trade arrangements, the fact is that global value chains (GVCs) and Industry 4.0 (known also as the Internet of Things) are defining and inescapable conditions of the global economy.
Through GVCs the global division of labor has become extended along multiple steps of production processes, creating greater efficiencies and prosperity but also upending some traditional industries. And Industry 4.0—where machines communicate with each other without human intervention—can, for example, improve business decision-making by enhancing the availability and reliability of real-time data, but it also accelerates labor-market upheavals like the shift to robots.
What is common to both GVCs and Industry 4.0 is the shortage of rules to ensure that they function fairly and effectively. And while hostility to global rules can be used to stir up nationalist fervor, an absence of rules is more dangerous: in that kind of environment, it is easier for both state and non-state actors to disrupt trading and data networks in a way that threatens the security and prosperity of global and technologically advanced economies like the United States and Germany.
It is in the interest of both countries to help the Argentine presidency identify ways that these two phenomena can contribute to the G20’s stated goals of inclusive and sustainable economic growth—and to help ensure they remain central concerns when Japan takes its own turn at the helm during 2019.