I’ve waited to write about the G20 trade ministers’ meeting in Milwaukee two weeks ago so the dust could settle. It turns out there was not much dust to settle. While the meeting, like many of its kind, was no doubt useful for the many bilateral meetings and informal sidebars that were held as ministers gathered in the Pfister Hotel, formal results were meager. There were four official items on the agenda: food security and the weaponization of food, structural overcapacity, most-favored nation (MFN) tariffs, and forced labor. Ministers reached agreement only on the first item and issued a statement on it. There was also a statement on forced labor, but in the end, it was signed only by the United States, Mexico, and Argentina. There was no consensus on the other two topics, although on the margins of an Organisation for Economic Co-operation and Development meeting the following week, 14 countries released a statement on overcapacity, pledging “whenever possible, complementary actions to defend our economies from the negative impact on trade and workers created by structural excess capacity and production.” Seven G20 members (Brazil, China, Indonesia, Russia, Saudi Arabia, South Africa and the African Union) did not sign.
Trump’s tariffs were not officially on the agenda, although the MFN issue implicated them indirectly since they have effectively demolished MFN in favor of a reciprocity based system, but I suspect they were a significant topic of conversation among the participants in the many private meetings that occurred. Those discussions, I also suspect, contributed to ministers’ reluctance to support the U.S. positions. The G20 members were targets of the forced labor tariffs, and some are also targets of the overcapacity investigation. Ministers had little enthusiasm for supporting U.S. actions that are widely regarded as bullying, particularly when it is their countries that are being bullied.
This was a small episode, but it illustrates the dilemma of Trump’s trade policy. He sees himself as a change agent for U.S. trade policy and for the trading system as a whole but is confronted with the reality that most other nations are not interested in climbing aboard his train. It is not unusual for presidents to encounter resistance to their plans, and they have a number of tools to deal with it, including diplomacy and a variety of sticks and carrots. Most presidents begin with diplomacy and then move on to other tactics if it is not successful. Trump, in contrast, usually starts with sticks and then adds more sticks if the first ones don’t work. Sometimes that works in the short term, but it leaves resentment in its wake which can come back to bite him later on. In the case of the G20 ministers’ meeting, other countries resisted joining the United States in declarations on some issues, including overcapacity and forced labor, because of the way they had been treated, even if the U.S. proposals were reasonable.
Another recent example is the G7 countries’ agreement to release 100 million barrels of diesel fuel from their reserves in response to Trump’s threat to impose a ban on U.S. diesel exports. One anonymous European official referred to this as “blackmail,” which was probably an accurate description. The fact that the United States did not work through the International Energy Agency, which normally coordinates fossil fuel releases, and instead went directly to the G7 nations added insult to injury.
In this case, the tactic worked—sort of. The United States got the commitment to release 100 million barrels, although it is not entirely clear whether those barrels are in addition to the 400 million Europe previously agreed to release or part of it. If it turns out to be the latter, then Trump was outwitted by the wily Europeans, but that may not matter to him because he has already taken credit for the win. In fairness, either way it was also a win for better policy, as the alternative—a ban on U.S. diesel exports—would have been far more disruptive to the global economy, so Trump deserves credit for not doing the stupidest thing others had recommended. Whether the action ultimately lowers diesel prices remains to be seen.
The lesson from these episodes is that tearing down the old system and simultaneously building a new one is complicated. Countries, like people, generally resist change, but unlike people, who are subject to their own government, countries are sovereign entities that do not have to do what someone else tells them. They can be bullied—Trump has proved that—but that often leads to concessions that are more on paper than real and resentment that bubbles up later on.
There is an alternative approach: Develop and strengthen multilateral institutions and rules that enable collective action that is willing rather than forced. That approach is out of favor these days, certainly in the United States but also in other countries. National sovereignty is having a moment. This has happened before, and it does not usually end well. Countries eventually have to relearn lessons they had forgotten and rebuild the institutions they had thrown overboard. It appears we will be going through that cycle again.
William A. Reinsch is a senior adviser (non-resident) and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C. He can be reached at [email protected].