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G20 Summit: it takes two to tango

If you have ever attended dancing classes, you will know there are different types of dance from around the globe. Tango is a form of partner dance that originated late in the 19th century in River Plate in Argentina, and is a combination of German waltz, Czech polka, Polish mazurka, Spanish habanera and African candombe.

This dance has the makings of a truly international melting pot. As the leaders of the 20 most industrialised countries met in the birthplace of tango, Argentina, given the current animosities between the great leaders of the globe, we could see the irony of this dance meant to represent the unity of different cultures.

Marking the 10th anniversary since the first G20 meeting, when global heads of state met in Washington to address the 2008 financial crisis, this year Argentina’s presidency of the G20 had “building a consensus for fair and sustainable development”. The focus of the meeting is an interesting topic in itself, in that most of the global turmoil could be summarised as the opposite of such a statement. In terms of setting expectations, it may be convenient to remember that the previous 2017 G20 summit culminated in world leaders agreeing to limit protectionism, commit to a rule-based international trade system, and advance policies aimed at sharing the benefits of globalisation.

Given how events panned out ever since, one might be tempted to say that the bar has been set quite low. The host, Argentinian President Mauricio Macri, has already had to deal with securing a $57 billion IMF loan, as his country grappled with an inflation reaching 30 percentage points. The country had to adopt severe austerity measures to momentarily avoid a replay of the early 2000s default. Argentina’s woes can be summed into a long history of wrong policy decision, excessive spending and dependency on the international credit system for funding and exports.

The thickest headline of the summit was the meeting between American President Donald Trump and Chinese President Xi Jinping in their first meeting since the start of a tit-for-tat trade war between the two world superpowers. Earlier this week, the markets rallied as the two leaders agreed to stop further escalation in trade tariffs scheduled for January by 90 days. However, this euphoria dissipated in the following days, as the market remains sceptic that this is nothing but a delay of an inevitable further escalation.

The agreement behind this truce involves an understanding that would see China buying a substantial amount of agricultural, energy, industrial and other products from the US, to reduce the trade imbalance between the two countries. The outcome of this deal may be a question of extending the time frame for the inevitable to happen, or it may eventually lead to a de-escalation of the trade war between the two countries.

Another anticipated meeting was that between Trump and Vladimir Putin. Following the Helsinki meeting earlier this year, it was agreed that the two leaders would meet at the sidelines of the G20 summit after, at the last minute, in a tweet, the American President called off the official meeting.

The developments of last week where the Russian navy impounded three Ukrainian navy vessels in the vicinity of Russian controlled Crimea have sparked another row between Russia and the West.

Already crippled by sanctions from a string of military interventions which include aiding Syrian President Bashar Al-Assad and allegedly supporting Eastern Ukrainian pro-Russia rebels, Russia has been crippled under further sanctions. The relief from the higher oil prices for Russia is being strangled by crippling sanctions that have Russia looking further into the East in a bid to overcome such sanctions.

The agreement behind this truce involves an understanding that would see China buying a substantial amount of agricultural, energy, industrial and other products from the US

An interesting development was the meeting of the RIC, formerly known as BRIC nations, which seems to show that there is strength in the new sort of alliance emerging between the leaders of China, Russia and India respectively. These three powerful countries are all seeking further trade between their economies, as they assert themselves further in the global sphere of influence.

In a drama with many acts, from the European side French President Emmanuel Macron travelled to Argentina amid violent domestic protests of the gilets jaunes against the planned eco-tax. It has since been announced that this tax is being postponed for six months, as the French administration negotiates with the protesters and seeks to find ways that do not impact the French people’s pockets to implement their ecological strategy.

British Prime Minister Theresa May had to put on a strong face meeting with world leaders, including Saudi Arabia’s crown prince Mohammed Bin Salman, and Australian Prime Minister Scott Morrison, promoting her Brexit deal with world leaders, and forging new security partnerships. The international media hounded the British Prime Minister, asking about a plan B, as her deal looks heading into a wall next Tuesday, when the House of Commons meets to approve her Brexit bill.

Despite the fact that she remains steadfast there is no plan B, observers from both sides of the aisle claim that possibly as many as 100 Tory MPs are prepared to vote the bill down, together with the Labour Opposition. Such would add fuel to the possibility of a no deal Brexit or even no Brexit.

Both these options would ensure further uncertainty and instability for markets in the UK and abroad. 

In the end, the anticipated key joint statement promised to revise the WTO (World Trade Organisation) rules.

The final outcome of this summit saw the participant countries agreeing to discuss the reform of the WTO to a rules-based mechanism, which was a main issue pushed ahead by the US.

Also, 19 of the 20 signatories of the Paris climate change agreement re-affirmed their commitment towards the accord with only the US holding out. The 31-point communiqué dwells into many areas of international affairs and objectives. However, most of the statements remain vague, none of which are binding. We can only hope that this meeting enables to foster a working partnership and an overall goodwill for progress on these issues.

Behind the smiles of the world leaders for the final photo of the summit lie disdain, scandal and overall global turmoil. The outcome of this summit may do little in the context of changing the overall global growth trajectory, and as the countries prepare to dance into the new year, one could be forgiven for looking back to Argentina 2018 slightly in disdain, for wasting yet another chance to foster global dialogue and action towards the pressing issues of trade and the environment.

This article was prepared by Daniel Gauci, HnD Management, CeFa, an investment adviser at Jesmond Mizzi Financial Advisors Limited. This article does not intend to give investment advice and the contents therein should not be construed as such. The company is licensed to conduct investment services by the MFSA and is a member of the Malta Stock Exchange and of the Atlas Group. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. Investors should remember that past performance is no guide to future performance and that the value of investments may go down as well as up. For further information contact Jesmond Mizzi Financial Advisors Limited of 67, Level 3, South Street, Valletta, on 2122 4410 or e-mail daniel.gauci@jesmondmizzi.com.

www.jesmondmizzi.com

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