The just concluded G20 meeting held in Bueno Aires, Argentina, November 30th – December 1st 2018 was, in some sense, a victory for the brash, in-your-face approach to diplomacy by US President, Donald Trump. His “America first” election mantra was put to the brute test of international trade negotiation – and appears to have come up trumps (excuse the expression). That the so-called G20 did not disintegrate into squabbling rumps has to represent triumph in itself. America, under Donald Trump, is a country loathed by many trading nations in the world, but it is also a country they know they cannot but want to do business with. Many others aspire to do business with America, but are unable to because of US indifference towards them. By the way, “G20” supposedly represents the twenty leading economies in the world, on whose shoulders the fate of commerce and international trade rest. Granted this, therefore, what qualifies Saudi Arabia for membership I wonder? The country manufactures nothing, has little or no industry. All it does is extract oil from the ground for onward shipping to the West. Also, why is South Africa a member, and Africa’s largest economy, Nigeria, not a member? Anyway, these are side issues for another day. What we are concerned with this week is dissecting the outcome of the G20 meeting to see whether it can be used as a barometer for the success of “America first” doctrine of the US President, or, whether today’s success for “America first”, is actually a portentous signal for the unwinding of US global dominance.
The communique issued by the leaders at the end of the meeting (summit if you like), re-affirms commitment to ‘rules based’ order. This is put in inverted comas advisedly, given President Trump’s propensity to make policy on the hoof. It is a “victory for restoring international institutions at a moment when multilateralism is going through a real crisis” says French President, Emmanuel Macron. That, of course, is a nice way of putting it. It is an attempt by the French President to gloss over a very tetchy, tempestuous meeting for, the group had wanted to make reference to the danger of reverting to protectionism by countries, but this was fiercely resisted by the US delegation, fearing it could be seen as a rebuke of the “America first” doctrine. The US delegation also pushed successfully for an insertion of a reference to the need to ‘reform’ WTO (World Trade Organisation). The leaders were reported to have “reluctantly” bowed to the US demand on a matter thoroughly and mercilessly litigated to Trump’s advantage during the 2016 Presidential campaign. So, is the US back on the ascendancy in global domination?
As lawyers would say, let us examine the evidence. By far the biggest US adversary in the trade negotiation is China. America has been busy imposing tariffs on Chinese imports into the US since July 2018, and China, of course, has been paying back in kind. The two countries have now agreed a “truce” or, cease-fire, on the on-going “trade war” between them. The Chinese Foreign Minister, Wang Yi described the talks between China and the US as “friendly and candid”, a diplomatic phrase for combative, single-minded discussion between two parties. Both countries had agreed not to impose new tariffs for 90 days (until January 1st 2019 effectively). Trump will leave existing tariffs on US$200 billion worth of Chinese products at 10% rate. However, if no agreement is reached within the window of 90 days, then, the US will raise the tariffs to 25%. China also promised to buy more US products based on “market demand” to ease the trade imbalance with America. President Trump has been twitting and touting the success of his hard-man tactics on trade with China. The Chinese apparent climb down on Donald Trump’s various demands is a great selling point to his “base” back home in America. “America first” is gaining momentum. Oh yeah?
What the public in the US and generally outside the country do not seem to readily understand, is that the Chinese actually hold the ‘trump card’ (again, excuse the expression) in all this. For years, the US budget deficit has been substantially funded with Chinese money. China has been buying the US “Treasuries” (bonds); the tool for raising funds from capital markets. China has bought and is holding onto some US$1.2 trillion of them. It has used dollars acquired through export to America and elsewhere to buy Treasuries, raking in billions of dollars for China in interests, which are currently being invested on infrastructure across Africa – in exchange for raw materials, of course. US Treasuries are the safest of all investments in the world because of their perceived cast-iron guarantee. Well, the Chinese could offload them on the market in a fit of temper a la Donald Trump, and that could trigger a “run” on the dollar, precipitating its fall and all the attendant consequences, but the Chinese are wise enough not to show their hand – just yet. They are holding the ace, while appearing to be appeasing Donald Trump. Who then is playing who for a fool you might ask?
Similarly, President Trump has vowed to end the NAFTA (North America Free Trade Area) Agreement signed by the previous administration because it allows the neighbouring countries to “take advantage” of America. What is lost on the public in the fog of this overtly nationalistic moves by President Trump is that the US actually rely and indeed need cheap labour from Mexico and other poorer nations bordering the US. At less than 4% unemployment rate, the US is technically in full employment. It needs the very migrant labour from Mexico, which Trump wants to build a wall to keep out. How is this making America great? Furthermore, Donald Trump has just about offended anyone who is anyone among the traditional US allies. He had once threatened to dismantle NATO (North Atlantic Treaty Organisation). A body set up for collective security of Western Europe and America, which many believe, has kept the peace since 1949. America, says Trump, is making a disproportionate contribution to the body, whose only engagement on collective security doctrine was activated in defence of (guess who?) America in the wake of the “9/11” attack on the US in September 2011. Nonetheless, Europe is now looking to create an alternative defence mechanism outside of American influence. How is this enhancing US dominance you might ask? While Donald Trump goes on the offensive with his bombasts across the airwaves, the Chinese have been busy expanding their sphere of economic influence around the globe, especially in Africa, dismissed as “shithole countries” by Donald Trump. Now, tell me, is America’s influence in this part of the world expanding or shrinking?
Furthermore, and in conclusion, the US currency has been the reserved currency of the world based on the post-World War II consensus. Coupled with its strong manufacturing base, the US has helped propel the world economy into growth and has given “Washington” an upper hand in the control of international finance. This is a “soft” American power, which successive US Presidents had leveraged on very carefully, without making too much noise. Donald Trump has now upended that, by its unilateral imposition of sanctions against Iran and, more crucially, against anyone found trading with it. By consequence, there is a greater desire to promote the Euro as a pillar of world finance coupled with a move by the Chinese, Russia and a few other countries towards creating a parallel currency for international trade. Its early days yet, but the train on that has already left the station. How is that going to cement America’s global dominance? This is, of course, a rhetorical question. Donald Trump is busy digging the grave of the golden age of American global dominance. US enemies around the world are praying he keeps digging.