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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

  Grade Domestic political management Deliberation Direction setting Decision making Delivery Development of global governance
Internal External
Attendance # compliments % members complimented # days # documents # words Stability Inclusion Democracy Liberty # commitments Compliance # Assessed # references Spread # references Spread
2008 A− 100% 0 0% 2 2 3,567 16 2 10 2 95 75% 8 0 4 39 11
2009 La A 100% 1 5% 2 3 6,155 29 6 9 0 129 57% 7 12 4 120 27
2009 Pb A− 100% 0 0% 2 2 9,257 11 21 28 1 128 67% 15 47 4 115 26
2010 Tc A− 90% 8 15% 2 5 11,078 47 32 11 1 61 68% 15 71 4 164 27
2010 Sd B 95% 5 15% 2 5 15,776 66 36 18 4 153 67% 41 99 4 237 31
2011 B 95% 11 35% 2 3 14,107 42 8 22 0 282 74% 22 59 4 247 27
2012 A− 95% 6 15% 2 2 12,682 43 23 31 3 180 77% 19 65 4 138 20
2013 A 90% 15 55% 2 11 28,766 73 108 15 3 281 69% 24 190 4 237 27
2014 B 90% 10 40% 2 5 9,111 10 12 1 0 205 72% 26 39 4 42 12
2015 B 90% 0 0% 2 6 5,983 13 22 0 2 198 71% 23 42 4 54 11
2016 B+ 95% 7 25% 2 4 16,004 11 29 34 5 213 73% 24 179 4 223 19
2017 B+ 95% 0 0 2 10 34,746 42 61 2 11 529 85% 17 54 6 307 19
2018 B− 90 0 0 2 2 13,515 23 53 7 2 128 77% 20 20 5 24 15
Total N/A N/A 68 N/A 26 60 180,747 403 360 188 34 2,582 N/A 229 877 55 1,947 272
Average N/A 95% 5.67 19% 2 4.6 13,904 33.58 30 15 3 199 71% 20 67 4 150 21

Notes:

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Appendix B: Participating G20 Leaders' Experience

Member Leader Summits Attended Summits Hosteda
Japan Shinzo Abe 6 G20 2019
Germany Angela Merkel 13 G20 2017
China Xi Jinping 6 G20 2016
Canada Justin Trudeau 4 G20 2010
India Narendra Modi 5 G20 2022
Turkey Recip Tayyip Erdogan 12 G20 2015
Argentina Mauricio Macri 3 G20 2018
Saudi Arabia Crown Prince Mohammad bin Salman 2 G20 2020
EU Commission Jean-Claude Juncker 5  
EU Council Donald Tusk 4  
Korea Moon Jae-in 2 G20 2010
United Kingdom Theresa May 3 G20 2009
France Emmanuel Macron 2 G20 2011
South Africa Cyril Ramaphosa 1  
Italy Giuseppe Conte 1  
Australia Scott Morrison 1 G20 2014
Indonesia Joko Widodo 4  
Brazil Jair Bolsonaro 0  
Mexico Andrés Manuel López Obrador 0 G20 2012
Russia Vladimir Putin   G20 2013
United States Donald Trump 2 G20 2008/9
International Monetary Fund Christine Lagarde 7  
World Bank David Malpass 0  

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

Date Total Standstill Rollback Services Growth Multilateral WTO G20 Institutions Governance Development
2014 4 1 1 1 1 - - -
2015 2 - - 1 - 1 - -
2016 14 1 - 2 3 2 3 3
2018 5 - - - 2 1 2 -
2019 15 -     4 -    

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Appendix D: G20 Osaka Summit Agenda and Achievements

Data Free Flow with Trust

Trade

Climate Change

Environment

Tax

Health

Aging

Gender

Quality Infrastructure for Development

Debt Sustainability and Transparency

Crime and Corruption

Security

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