At the G20 Summit, a Shift from Trade to Digital
Sometimes the best way to make progress is to change the conversation. This idea seems to have been at the heart of Japan’s approach to the Osaka G20 summit it chaired this past weekend. Amid ongoing tensions in international trade—mostly owing to the mismatch between China’s state-capitalism and a global economy dominated by liberal, market economies—the contrast in the leaders’ declaration between the terse language on challenges to the World Trade Organization and the expansive text on the future of the digital economy is striking.
Or perhaps it’s not so striking. In a world where data flows are contributing more to global GDP than trade in goods maintaining an open and secure digital economy will increasingly drive trade policy. The Japanese G20 Presidency had already given a push in this direction when it hosted the G20 trade and digital economy ministers for a joint meeting earlier in June, the first time they convened together in the forum’s history. Now in the leaders’ declaration from the summit the language on trade is immediately followed by an endorsement of Japanese prime minister Shinzo Abe’s idea of “Data Free Flow with Trust,” and an affirmation “of the importance of interface between trade and digital economy.”
Because of Japan’s activist international trade policy—it recently signed both the updated, 11-country version of the Trans-Pacific Partnership (the CPTPP) and a bilateral free trade agreement with the European Union—it is well placed to advance the debate on digital trade rules. While the CPTPP emphasizes “data free flow,” for the EU-Japan FTA the “trust” element is key, since the EU insists its trade agreement partners enforce strong personal data protections. U.S. policy, on the other hand, has traditionally placed a premium on lifting restrictions to digital trade (like requirements to store data locally). Finding common ground between these two positions falls in the helpful category for concluding the U.S.-Japan FTA that is in the works but is a sine qua non if the U.S. and the EU (who are also negotiating with each other) are ever to seal a comprehensive trade deal.
Although trade policy was partly camouflaged as digital policy at the G20, the leaders did address current trade conflicts as well. Building on last year’s summit in Buenos Aires, most of the focus was on reforming the WTO. This time, there was a specific mention of the need to fix its dispute resolution system, which the Trump administration believes is exceeding its mandate in a way that helps China and hurts the U.S. Because the U.S. is holding up the reappointment of judges to the system’s appellate body, dispute resolution in the WTO could come to a halt at the end of the year.
There is also one intriguing linguistic change from last year. The 2018 Buenos Aires declaration refers to both the need to improve the “rules-based international order” and the contribution of the “multilateral trading system.” These insider terms are missing this time. In their place is a pledge to realize a “free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment.” In other words, language not for experts but for the interested public.
At a time when only one participant out of 28 in a recent focus group—part of a broader public opinion survey by the Center for American Progress—recognized the phrase “liberal international order,” the G20 may be on to something. To ensure that a liberal spirit continues to guide the global economy more plain speaking (and fewer shibboleths) could go a long way.