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Analysis

Prospects and Possibilities for Japan's Osaka Summit

John Kirton, G20 Research Group
June 20, 2019

Paper presented at a joint workshop on "The G20 Osaka Summit: Prospects and Possibilities," sponsored by Keio University's East Asia Studies Institute and the G20 Research Group, University of Toronto, with the support of the Bill Graham Centre for Contemporary International History and the Jackman Foundation, held at Keio University, Tokyo, Japan, June 20, 2019. Version of June 22, 2019.

Introduction

Significance

The 14th G20 summit, taking place in Osaka, Japan, on June 28–29, 2019, is a very important event. It launches the second decade of G20 summitry, since the leaders first met in Washington DC in 2008. It is the first G20 summit hosted by Japan, the world's third most economically powerful country. It brings the G20 back to an Asia emerging as the centre of the global economy, following the successful summits there in China in 2016, Australia in 2014 and Korea in 2010. It takes place only seven months after the G20 summit in Argentina in late 2018.

Japan's G20 summit has a larger significance for global governance as a whole. It is the first in a three-month sequence that started at Osaka in June, is followed by the G7 summit in Biarritz, France, on August 24–26 and culminates at the United Nations in New York in the third week in September, where four UN summits will be held. They are on climate change, universal health coverage (UHC) on September 23, financing for development, and the 2030 Agenda's Sustainable Development Goals (SDGs). All are priorities at the Osaka Summit, where the sequence starts.

Challenges

The Osaka Summit confronts the critical challenges of escalating trade, technology and security disputes, above all between a powerful United States and China, the climate crisis, rapid digitalization, aging populations, harms to human health, slowing and unbalanced economic growth, financial fragilities and geopolitical tensions in Asia, the Middle East and elsewhere. It comes with profound concerns about the ability of the major UN multilateral organizations and order from the 1940s to cope, without the help of the systemically significant, intensely interconnected countries now assembled in the G20.

Priorities

At Osaka, leaders will focus on Japan's summit theme of promoting a free, open, inclusive and sustainable "human-centred future society." Their priorities are free trade and innovation as engines for shared growth that reduces disparities, global standards for "data free flow with trust," development through quality infrastructure and the SDGs, international health, climate change, ocean marine litter, institutions for the digital economy, and an aging society that affects financial and social policies and inclusion. Other issues are safeguards for shared growth such as debt sustainability and transparency in low-income countries, global imbalances and market fragmentation in financial regulation and supervision. Technological innovation embraces international tax, financial innovation (including crypto-assets) and development implications. The standard issues of money laundering and terrorist and proliferation finance also appear. It is a broad agenda that covers all of the UN's 2030 Agenda for Sustainable Development and the SDGs.

The Thesis

At Osaka, G20 leaders will produce a summit of broad, substantial success. The Osaka Summit will be at least as successful as the average of the 13 before (see Appendix A).

Propellers of Performance

The Experienced, Democratic Multilateralist Leaders

The first spur to Osaka's success is the significant experience the G20 leaders bring (see Appendix B). The most experienced leaders are led by its host and other veterans who believe in open trade, environmental protection, health, adjusting to aging populations and above all supporting the multilateral order based on the ideals and institutions of the United Nations.

Host Prime Minister Shinzo Abe is a veteran of six G20 summits. He recently hosted the G7's successful Ise-Shima Summit in 2016. Germany's Angela Merkel has been to all 13 G20 summits since the start. Also experienced are India's Narendra Modi, who has been to five, and Canada's Justin Trudeau, who has participated in four. Jean-Claude Juncker, president of the European Commission, and Donald Tusk, president of the European Council, are veterans too. Turkey's Recip Tayyip Erdogan, Russia's Vladimir Putin, China's Xi Jinping with six summits and Saudi Arabia's Crown Prince Mohammad bin Salman are the only veterans whose commitment to democracy, openness and multilateralism is in doubt.

The Intense, Innovative Ministerial Meetings

The second spur to Osaka's success is the work of the G20's innovative set of lead-up ministerial meetings — for agriculture on May 11–12; finance and central bank governors on June 8–9; trade and the digital economy on June 8–9; energy transitions and the global environment for sustainable growth on June 15–16; and finance and health together on June 28 at the Osaka Summit itself.

The first meeting was for agriculture ministers in Niigata on May 11–12. It produced 15 commitments, including two referencing health, one climate change and two gender.

The second ministerial was for finance ministers and central bank governors, held in Fukuoka on June 8–9. It produced 30 commitments across 10 subjects, more than ever before. Fukuoka's commitments shifted the G20 finance ministers' focus to crime and corruption, debt transparency and sustainability, while continuing with tax. Digitalization appeared in several commitments.

The third ministerial was for trade ministers, in Tsubuka on June 8–9. It was uniquely combined with ministers for the digital economy. It produced 15 commitments, the highest the trade ministerial ever had (see Appendix C). The first commitment was: "We strive to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, to keep our markets open." The second was: "We agree that action is necessary to improve the functioning of the [World Trade Organization]." In all, three commitments dealt with the WTO and its reform.

The fourth ministerial was for energy transitions and the global environment, taking place in Karuizawa on June 15–16. It was the first time that G20 environment ministers met. The institutional innovation reflected Japan's approach to advance on climate change control by treating it as an issue of clean energy, which technology can produce.

It worked. G20 energy and environment ministers, alone and together, produced 79 commitments in all. G20 ministers agreed to create the first international framework for members to voluntarily reduce their plastic pollution in the ocean. Members would report their data, share solutions, adopt a life-cycle approach and start implementation.

Energy ministers discussed the recent attacks on oil tankers in the Gulf of Oman and their implications for energy security and the price of oil.

The fifth pre-summit ministerial is for finance and health, to be held on June 28 at Osaka. This unique combination seeks to have finance ministers understand the costs that poor health will impose and how cost-effective investments should be made and can be financed. A key component will be financing the extension of publicly supported UHC in developing countries over the longer term.

Osaka's Achievements

At Osaka itself, summit success will begin on its most difficult issues of digital free flow with trust, trade, and climate change, oceans and the environment and will continue across a broad range of subjects (see Appendix D).

Data Free Flow with Trust

The first achievement will be a consensus on a work program, and perhaps principles and guidelines, on Abe's signature initiative for launching an "Osaka Track" for digital free flow with trust. It will focus on business data. Given the General Data Protection Regulation in Europe and cybersecurity threats including Russian hacks and spying, Japan and its G20 partners feel a need for rules to facilitate cross-border data flow for big data and artificial intelligence (AI).

The Organisation for Economic Co-operation and Development (OECD) ministerial produced a set of principles and guidelines on the use of AI. At the Osaka Summit, China, Saudi Arabia and Russia will adapt them and agree to the result, rather than have their host and their summit visibly fail.

Trade and Investment

On trade and investment, the U.S. approach will confront the other G20 members' belief in international institutions and rules. Yet many members wish to respond to China's subtle protectionism in many ways.

All G20 members declare their adherence to the rules but claim others are cheating. On state-owned enterprises, steel subsidies, hacking and the theft of intellectual property, the United States claims that China is breaking the rules.

Japan has begun its bilateral negotiations with the United States on autos and on other matters of economic significance to Japan's economy. When visiting Abe in Tokyo in late May, U.S. president Donald Trump agreed to defer his threatened protectionist trade actions against Japan until after the Japan's elections in the House of Councillors in July and thus after the Osaka Summit at the end of June.

All in the G20 system recall that at Buenos Aires, the two high-profile side events both produced trade-liberalizing deals: the meeting of Trump with Canada's Justin Trudeau and Mexico's Enrique Peña Nieto meeting to sign the United States–Mexico–Canada Agreement (aka the new NAFTA) and Trump's dinner with China's Xi Jinping, which produced a trade truce and new round of talks.

Just before Osaka, Trump produced a mini-repeat, by removing U.S. tariffs on Canadian exports of aluminum and steel to help get the new NAFTA ratified. He then quickly backed off his threat to impose a 5% tariff on Mexico over its immigration policy. In mid May he phoned Xi to arrange a meeting at Osaka and instructed his trade team to resume negotiations with its Chinese counterparts.

Osaka could thus produce a repeat of Buenos Aires in modified or even enhanced form. It could contain a U.S. trade truce with China, spur U.S. trade liberalization with Japan and advance open trade in other ways.

Climate and Environment

On the third major subject, the "global commons" of climate, oceans and the environment, substantial practical advances will come.

On climate change, there will be an agreement among all members except the United States to support the Paris Agreement, proceed to complete its implementing rulebook at the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) in Chile in December, and improve the national determined voluntary contributions committed at the scheduled time of the COP meeting in December 2020. The United States will repeated its declared intention to withdraw from the Paris Agreement in November 2020, while reaffirming its recognition of the need for a cleaner natural environment.

Climate finance will be advanced in a limited way. Korea seeks early down payments on replenishing the Green Fund. Others want the money to be devoted to global health as elsewhere.

The United States will again stress clean energy as the key instrument. It will be supported by Japan, which is strongly motivated not to offend the United States and has long highlighted the many clean technologies Japan has.

On the oceans and marine waste, leaders will endorse their G20 ministers' agreement to create a voluntary international framework for members to reduce their ocean plastic pollution. Under it members would report their data and share solutions. Leaders might add some further steps.

Biodiversity will be addressed. China is hosting the next COP to the Convention on Biological Diversity. But the United States is not a signatory so progress will be slight.

Tax

On tax the G20 will continue its successful work on base erosion and profit shifting (BEPS) and the automatic exchange of information (AEOI) by inducing more countries to adhere to the expanding OECD-G20 regime.

On digital taxation, a very controversial issue, leaders will produce a consensus on the principles for creating a revolutionary new regime by 2020. It would share the profits from digital firms among the countries where the value was created, by the proportion of the customers or users in them.

Health

Health will see important progress too. Leaders will produce a vision of UHC, cast in development terms and as a long-term goal. The United States will not agree to instituting publicly funded UHC at home.

Action against anti-microbial resistance (AMR) will be advanced. Work will continue on diseases affecting the developing world, in particular — malaria, tuberculosis and polio. The value of adhering to the International Health Regulations could be endorsed, as could nutrition for early childhood development, and disadvantaged rural communities could be too. Japan will succeed in having the value of robotics for health care noted. There will be action against the expanding Ebola epidemic, in response to its spread from the Democratic Republic of the Congo into neighbouring Uganda in mid June.

Aging

On aging, Osaka will set an agenda for future work. G20 leaders will affirm that aging is a common problem with important impacts on productivity, fiscal policy, monetary policy, employment, health, healthcare costs and nutrition. It will note that some G20 members, led by Saudi Arabia, have a youth bulge. It will thus adopt a lifelong approach.

Quality Infrastructure for Development

On quality infrastructure for development, G20 leaders will set common principles that will guide the practices of the multilateral development banks that they control. These will aim at smarter spending that does not aggravate the debt burden of developing countries, crowds in the private sector in a sensible way and supports several other SDGs including those on climate change, the environment, health and trade.

Debt Sustainability and Transparency

On the related issue of debt sustainability and transparency of low-income countries, leaders will agree on guidelines that will govern the work of the multilateral development banks, including the BRICS New Development Bank and the Asian Infrastructure Investment Bank.

Gender

On gender equality, G20 leaders will focus on women in the workplace, reaffirm their 2014 Brisbane commitment to close the gender gap by 25% by 2025 and emphasize women's entrepreneurship and leadership. They will note the importance of the social context of child health and an infrastructure ecosystem to help women in the workforce be treated with respect and equality. Getting more women educated in science, technology, engineering and mathematics will be endorsed.

Corruption

On anti-corruption, leaders will press the remaining G20 members to join the OECD's Anti-Bribery Convention. There will be no consensus on Canada's desire to have the convention cover employees of state-owned enterprises, and little on India's desire for new extradition treaties for broader economic crimes.

Security

A broad range of security subjects will be addressed. These include terrorism, in response to the rising attacks in Asia, the Middle East and elsewhere. Nuclear proliferation will appear in private discussions about nearby North Korea and distant Iran. There could even be a discussion about democracy and human rights, as Trump has said he would raise this issue in his discussion with Xi.

Economics and Finance

Less real progress, if any, will come on the G20's traditionally core economic and finance issues — global economic risks; global imbalances; fiscal, monetary and exchange rate policy; reform of international financial institutions; and financial regulation and supervision.

Conclusion

In all, G20 leaders at Osaka will thus produce a summit of broad substantial success.

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Appendix A: G20 Summit Performance, 2008–2018↩

Notes:

• a London; b Pittsburgh; c Toronto; d Seoul.
• N/A = not applicable. Only documents issued at a summit in the leaders' name are included.
• Grade is based on a scoring scheme created by John Kirton, as follows: A+ Extremely Strong, A Very Strong, A− Strong, B+ Significant, B Substantial, B− Solid, C Small, D Very Small, F Failure (including made things worse).
• Domestic political management: participation by G20 members and at least one representative from the European Union and excludes invited countries; compliments are references to full members in summit documents.
• Deliberation: duration of the summit and the documents collectively released in the leaders' name at the summit.
• Direction setting: number of statements of fact, causation and rectitude relating directly to open democracy and individual liberty.
• Decision making: number of commitments as identified by the G20 Research Group.
• Delivery: scores are measured on a scale from −1 (no compliance) to +1 (full compliance, or fulfilment of goal set out in commitment). Figures are cumulative scores based on compliance reports. * = 2017 is an interim score and is excluded from the cumulative average.
• Development of global governance: internal are references to G20 institutions in summit documents; external are references to institutions outside the G20; engagement groups are references to engagement groups. Spread indicates the number of different institutions mentioned.

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Appendix B: Participating G20 Leaders' Experience↩

Note: a Summits hosted by country, but not necessarily by the leader at the time of the Osaka Summit.

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Appendix C: G20 Trade Ministers' Commitments, 2014–19 ↩

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Appendix D: G20 Osaka Summit Agenda and Achievements↩

Data Free Flow with Trust

• Launch "Osaka Track" of negotiations, under umbrella of the World Trade Organization

Trade

• Set United States-China truce
• Endorse need for trade for growth, World Trade Organization reform
• No anti-protectionist pledge or rollback

Climate Change

• Initiate clean energy technology projects
• G19 promise to support and strengthen Paris commitments, complete rule book by 2020

Environment

• Agree voluntary international regime for data gathering on oceans plastic
• Implement marine litter clean-up projects

Tax

• Endorse Organisation for Economic Co-operation and Development-G20 new user-customer nexus principles, agree to set rules by 2020
• Base erosion and profit shifting and automatic exchange of information regimes extended to more countries

Health

• A vision and strengthened financing for developing countries to achieve universal health coverage by 2030
• Advance work on antimicrobial resistence, malaria, tuberculosis, polio
• Nutrition for early childhood development
• Ebola's spread

Aging

• Broad agenda begun

Gender

• 25x25 commitment endorsed

Quality Infrastructure for Development

• Principles agreed

Debt Sustainability and Transparency

• Principles agreed

Crime and Corruption

• Align with tough new Financial Action Task Force rules on crypto currency exchanges, data transfer "travel rule"

Security

• North Korea
• Iran

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