If leading countries cannot band together against protectionism, then world markets will become mired in confusion, and the economies of those countries will surely suffer the consequences.
Finance leaders of the Group of 20 industrial and emerging-market nations, including Japan, the United States and China, along with the European Union, met recently to discuss issues facing the global economy. Though it was a regular meeting, there was an important issue at stake: the question of how deep finance ministers and central bank governors could go in addressing trade friction between the United States and China.
In spite of this, a marked decline in the body's unifying force stood out.
Already having placed import restrictions on Chinese steel, the United States is poised to decide as early as in June whether to implement major punitive tariffs against China. Within the G-20, both Japan and the European Union have expressed reservations about U.S. protectionism. The U.S., however, has defended its measures as legitimate, and the two sides have been unable to come to an agreement.
The finance leaders also forewent a joint statement, on the grounds that a statement urging dialogue between the United States and China had been issued just one month before. However, the situation has grown more serious than it was a month ago. The parties should have issued a renewed statement calling for self-restraint.
Since the inauguration of the administration of U.S. President Donald Trump, the G-20 statements have backpedaled from an anti-protectionist stance. Furthermore, if no effective measures against U.S.-China frictions are to be implemented, the very significance of the G-20 will be brought into question.
The heaviest responsibility lies with the United States. Japan and the European Union have also criticized China's excessive steel production in the past and the issue had been discussed within the G-20. And based on a G-20 agreement, Japan, the United States and the European Union previously initiated ministerial level discussions urging China to amend the situation. Rather than implementing import restrictions that are suspected to violate international rules, the U.S. should go through the G-20.
The response of China is also problematic. It criticized the U.S. during the latest G-20 meeting, but it stands at the epicenter of the steel problem and other issues. It should have clearly showed that it was working on measures to rectify the situation.
Japan is in a position to lead the discussion in place of the United States. Finance Minister Taro Aso has asked the U.S. to exempt Japan from import restrictions, but he really should have been working to have the restrictions removed altogether.
The G-20 is a forum for advanced and emerging nations to coordinate policy. In the past member countries were even able to overcome the global economic downturn following the shock collapse of U.S. financial services giant Lehman Brothers. The G-20 also is a gathering of countries with differing values, like the U.S. and China, and in the latest session, Argentina, the current chair of G-20, said there were limits when it came to building a consensus, but still, the G-20's role of leading the world to stable economic growth remains unchanged.
Friction between the U.S. and China is expected to continue for some time. G-20 members need to tenaciously work to prevent protectionism. Japan, which will chair the G-20 next year, bears a heavy responsibility.