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June 28, 2019

In Osaka

We never cease to be amazed about the hopes for G20 meetings expressed by some commentators - as though this was a democratically legitimised world government. The G20 and the G7 came into their own when governments co-ordinated global macro policies during the 1980s and right after the global financial crisis. 

The rise and fall of the multilateral G groups coincides much with the rise and fall of global liberal capitalism and the phenomenon known as globalisation. What the EU’s founding fathers understood better than modern policy architects is that multilateral action needs to be underpinned by democratic structures and legal enforceability. This is why a Victor Orbán or a Matteo Salvini cannot on their own derail the EU. Where the EU went wrong is when it departed from the script of its elders - when it created half-baked multilateral structures like the eurozone or Schengen. 

The G20 succeeds and fails with the chemistry of its leaders. A fitting example last night was the scheduled meeting between Donald Trump and Angela Merkel. Trump kept a visibly irritated Merkel waiting for a long time because he had to fire off tweets to comment on the debate among Democratic presidential contenders. The multilateral stage has degenerated into the unilateralists’ showcase. We may be shocked, but should not really be surprised.

At the Osaka G20, the main issue is not what will or will not be in the communique. FAZ journalists managed to write a whole article about German hopes on whether the fight against protectionism could somehow find itself into the declaration or not. We don’t think that even German readers care about this. It appears to us that the world of economic and financial diplomacy increasingly operates in a parallel universe. This is also happening in the EU where diplomatic paper tigers like Jean-Claude Juncker’s investment programme or the Iran SPV lead existences separate from the real world.

If there is one issue of interest during the Osaka jamboree is the possibility of a bilateral goodwill gesture by Trump in the trade conflict with China. We will leave that issue where it belongs: outside our reservation, except perhaps concerning what it might suggest about the looming US/EU trade conflicts. The script is no longer that of a of a classic 1930s-style trade war, but a new more dramatic one, made up of threats, action, counteraction, standstill agreements, renewed threats. The main channel through which it works is uncertainty.

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