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Championing Latin America in the G20

Vista from Buenos Aires
Sabrina Shaw, Regional Director, Latin America, G20 Research Group
November 3, 2017

Following the global financial crisis in 2008, the G7 was expanded to include a more geographically representative group of 20 countries (G20). The largest number of G20 members come from Europe. Asia is in second place with the four members of Japan, China, Korea and Indonesia, leaving the Latin American region with the three representatives of Argentina, Brazil and Mexico. That is why, to champion Latin American perspectives and contributions in G20 summits, regional leaders are emphasizing the need for the three Latin American members to find common interests, speak with a unified voice and work together to define regional priorities for the upcoming G20 cycle.[1]

How well have the three Latin American G20 members done this in the past and will they continue to do so with Argentina as the incoming G20 summit host? To answer, this commentary reviews the prospects for Argentina's 2018 G20 agenda, analyses the prospects for a common regional strategy for the Argentine presidency and explores Argentina's initial efforts to coordinate with Brazil and Mexico in a cooperative regional approach.

If past coordination is considered to have been "insufficient" to influence the G20 agenda, Argentina's approach is shaping up to be active, inclusive and pragmatic. The Argentine, Brazilian and Mexican sherpas are already working closely together to gather and translate different regional outlooks into a representative stance. The prospects are thus solid to strengthen and give visibility to a focused and coordinated Latin American agenda for the next G20.

Argentine president Mauricio Macri will formally set out the agenda on the eve of assuming the G20 presidency on November 30, 2017, yet clear priorities have already emerged.

The first, and significant for the region, is tackling rising inequality by reducing poverty and ensuring inclusive growth. Latin America should not be satisfied with the current rate of economic growth, which is under five percent. Changing the current model of development to achieve this will require strategic trade and investment in a broad array of areas, notably education, job creation, innovation and infrastructure.

That is why the second key set of issues on Latin America's common agenda are employment and education in the age of technology and digitalization. Argentina is prioritizing a proactive approach to crafting the work force of the future, while emphasizing the need to tackle corruption, which erodes economic opportunities and leads to misguided policies. This agenda is already finding widespread support, including through the G7 Future of Work Forum launched at the G7 labour and employment ministerial meeting on September 29-30, with Canada committing to take action on this work as incoming host of the 2018 G7 Charlevoix Summit.

Third, Argentina, Brazil and Mexico are committed to trade liberalization and integration of regional and global value chains. This is a positive agenda in support of the rules of the multilateral trade system in the World Trade Organization (WTO) and to advance regional trade integration to counter surging protectionism, notably in the United States. This approach envisages the consolidation of regional and global value chains through financing for infrastructure and the inclusion of small- and medium-sized enterprises.

Apart from the traditional core G20 issues of global financial and macroeconomic governance, a myriad of other issues find mutual interest in the region and are high on its common agenda, notably those linked to the 2030 Agenda's Sustainable Development Goals and to migration. Setting the stage for leadership on climate change, Argentina was the first country to submit a revised national climate action plan in compliance with the Paris Agreement. During its G20 presidency, Argentina plans to address climate change and energy in different working groups and may well link discussion of the future of work to a shift to a low-carbon economy, notwithstanding the Trump administration's declaration that "the war on coal is over."

Since the 2008 global financial crisis, Latin America has repeated the cycle of economic expansion followed by contraction, struggled to maintain investor confidence and financial stability, fought high inflation and fiscal deficits, depended highly on commodity exports, and faced trade volatility linked with a lack of dynamism in advanced economies and an adjustment to China's economic slowdown. Despite a relatively stable period in the early 2010s, Brazil, the largest economy in the region, went into recession and was engulfed by the painful process of tackling corruption, a foremost challenge throughout Latin America, through a gruelling but robust judicial process. To regain investor confidence and credit ratings, as well as to counter a perceived legacy of being overlooked, the inclusive and wide-ranging coordination process led by the Argentine presidency in itself is showcasing what the region has to offer and where expectations lie. The emerging priorities are focused on increasing the quality of living of the region's citizens and ensuring its place among global decision makers in the G20 and beyond.

Trade and investment liberalization is considered by Latin American leaders to be an essential basis for the upcoming G20 cycle to stimulate employment and equity through greater integration, openness and inclusiveness in the technologically sophisticated 21st century. The future of the multilateral trade system will be tackled by trade ministers at the WTO ministerial conference in December in Buenos Aires, with the major agricultural exporters in the region (Argentina and Brazil) advocating improved market access. On the regional trade front, Mercosur cooperation is considered to have reached an unprecedented level. Negotiations for a preferential trade agreement between Mercosur and the European Union are currently accelerating, but the deal is being held back once again by long-standing resistance from strong agricultural lobbies on both sides of the Atlantic. A recent offer by the EU on farm products, including import quotas for beef and ethanol, did not meet the expectations of the Mercosur members of Argentina, Brazil, Paraguay and Uruguay. The talks stalled in 2004 for similar reasons.

For Argentina to make the first South American presidency a success, it will have to counter the unprecedented dissent from within the G20 on key issues, first emerging during the 2017 German summit with rookie U.S. president Donald Trump attending for the first time. As evident at the July Hamburg Summit, Trump has positioned the United States as a norm breaker, rupturing the consensus on which countries have based cooperation and disrupting progress on a wide range of issues, notably the future of the multilateral trade system and the WTO as well as climate change. From inside the ranks of the G20, the U.S. stance on pivotal issues at the Hamburg Summit challenged the prevailing norms and rules embedded in the United Nations and the Bretton Woods institutions of the International Monetary Fund, World Bank, and the General Agreement on Tariffs and Trade and the WTO. Trump joined the voices of the anti-globalization demonstrators in his rejection of the status quoarrangements for global governance in the post–World War Two era. His vision for commercial exchange aligns with the resurgence of protectionism and economic nationalism. It comes at a juncture when Latin American countries are interacting more than ever in the global arena, relying on the multilateral architecture and rules to support trade and investment to grow their economies sustainably and raise living standards.

How can the Argentine presidency deal with the "Trump factor" as it works to unify the G20 membership behind an ambitious yet pragmatic agenda? What about Europe's "existential crisis" following Britain's exit from the EU and the pressures arising from increasing migration? Will it be as difficult for Argentina's Mauricio Macri to build political impetus in support of multilateralism and openness in Buenos Aires as it was for Germany's Angela Merkel in Hamburg? How can diverging views on trade and climate change be accommodated through constructive ambiguities in a consensus communiqué? These are the questions that must be on the mind of Argentine sherpa Pedro Villagra Delgado as he travels to meet his counterparts in the region and beyond.

While prioritizing a Latin American vision for its upcoming presidency based on a high degree of convergence of interests and values, Argentina is aware of the need to attract the support of the broader G20 membership, notably in coordination with South Africa as the next chair of the BRICS and with Canada as the G7 chair in 2018. As recently noted by Delgado, much rests on the ability of the presidency to streamline the G20's multifaceted agenda, while maintaining its core mandate to coordinate global economic and financial stability.

Under the guidance of the Argentine presidency, Latin America is poised to define its priorities and those of developing countries on the global governance agenda. How well it is able to articulate this vision and overcome the "new mediocre" global economic trend will depend on a myriad of factors beyond its control. The post-war spirit of multilateral cooperation has an outspoken skeptic within its ranks, with consequent uncertainty for global markets and the future of the WTO rules-based trade system.

The regional political panorama is also uncertain, with six countries facing elections in 2018 (Brazil, Chile, Colombia, Costa Rica, Mexico and Paraguay) and Venezuela in ongoing crisis. Following the Trump administration's decision to renegotiate the North American Free Trade Agreement, uncertainty is significant for the region's trade agreements with the United States, particularly for Mexico. U.S. protectionism will affect trade and investment flows, posing a risk for Latin America as export growth and diversification are essential elements of the region's recovery strategies. China's economic trajectory, as a locomotive of growth in Latin America, is also an element of uncertainty. According to some experts, China's increasing gains in regional market share, far from favouring integration, have hampered Latin America's ability to diversify its industrial matrix, with consequent risks for employment and innovation. In order to reverse this dynamic, the role of Mercosur is considered fundamental to devising a common strategy to expand regional markets and value chains in support of employment, as well as in increasing the bloc's bargaining power.

Argentina has the incentive and political will to dedicate itself to brokering a nuanced outcome for the G20 cycle in the year ahead. A shifting global context makes it all the more challenging for Argentina to balance the tensions between promoting global policy coordination and accommodating often conflicting domestic priorities of G20 members. Managing expectations and keeping the U.S. engaged in the G20 process and consensual outcomes is considered paramount.

What is at stake goes beyond the G20. With protectionism and political populism on the rise, the risk is to perceive international relations as a zero sum game, especially with a major player — and the world's largest economy — less interested in global coordination and intent on challenging the prevailing system from within. This is a volatile geopolitical scenario for even the best of efforts to manage.

[1] This commentary has been informed by presentations from the sherpas from Argentina (Pedro Villagra Delgado) and Brazil (Carlos Cozendey) as well as the sous-sherpa from Mexico (Erika Sandoval), RIBEI (Red Interamericana de Estudio Internationales) conference at the Universidad Naciónal Tres de Febrero, Buenos Aires, September 26-27, 2017; and the Conversation at the Wilson Centre with Ambassador Villagra Delgado, Washington DC, October 13, 2017. It also benefitted from discussions with Renato Flôres, Fundação Getúlio Vargas.

Sabrina ShawSabrina Shaw, PhD, Regional Director, Latin America, of the G20 Research Group, where she follows and writes on the Argentine presidency of the G20, which starts on 1 December 2017 and runs through 2018. She received her doctorate from Chulalongkorn University in Bangkok on bioenergy in the Mekong. She worked for over a decade at the World Trade Organization, including as secretary to the WTO Committee on Trade and Environment and to various dispute settlement panels. She lives in Buenos Aires and is currently also an associate at the International Institute for Sustainable Development. She is working with the International Centre for Trade and Sustainable Development, the Fundación Foro del Sur and the International Migration Organization to prepare the Symposium on Trade and Sustainable Development and the Forum on Migration, Trade and the Global Economy to be held alongside the WTO Ministerial Conference in Buenos Aires on December 11-14, 2017.

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