International summits of various stripes seem to be growing in frequency. This week, there was the G20 summit in Brazil, which came with yet another broad declaration short on specifics. The lack of clear messaging highlights the underlying tensions between the countries taking part. Ahead of the Summit, a scathing commentary by French daily Le Monde lashed out at Brazil’s leftist president, Lula da Silva, arguing that Brazil is “sparing Moscow and drawing closer to Beijing.”
Tensions are not only about Ukraine, however. One of Lula’s obsessions was to use the G20 to push through a 2% global taxation on billionaires’ incomes. In the end, he managed to get the tax into the final declaration; but after fierce opposition by Argentina, now led by libertarian Javier Milei, the G20 declaration was adopted with Argentina partially dissenting on certain aspects. It is telling about the hopelessly leftist mindset in Western Europe that participating countries like Germany, the UK, France, and Italy appeared happy with this, as well as with content related to the UN’s previous 2030 sustainable development agenda. In a speech, Milei railed against this; calling it “a supranational program of a socialist nature.” He also objected to UN proposals for regulation of hate speech on social media, describing those as an infringement on national sovereignty.
Milei furthermore argued: “Today, the international community is governed by a system of imposition, not by one of symmetrical and autonomous cooperation.” He warned: “If it is about imposing greater state intervention in the economy, don’t count on us.”
Milei’s success at home is increasingly difficult to deny. Last month, inflation fell below 3%. That is still terrible, but it is the first time since November 2021 that it is beneath 3%. It signifies a big drop compared to one year ago when Milei was elected. Economic growth forecasts for Argentina are being revised upwards.
Climate alarmism
Another priority Lula tried to push was climate change alarmism, as he urged the group of 20 leading economies to reach net zero climate emissions five to ten years ahead of schedule. The times are changing, however. The expected withdrawal by the United States from the Paris Climate Accord in 2025 can be considered a big blow to those attempting to instigate climate panic.
Interestingly, the final G20 statement dropped any explicit call to phase out oil, gas, and coal. The G20 has spoken—just not in words. It is yet more evidence that economic reality is slowly imposing itself.
A different approach could be to replace the Paris Accord and its punitive approach with a “Climate and Freedom Accord”, whereby signatories to such an alternative international treaty would benefit from trade advantages, provided they implement climate-friendly free-market policies. A study by the Warsaw Enterprise Institute and like-minded think tanks explains that this would “de-bureaucratise the economy”, along with “tax changes … to make investing in PP&E (Property, Plant, and Equipment) more profitable in a way that incentivises companies not only to maintain their current capacities but also to modernise and develop new projects. Subsidies of any kind should be abolished in an orderly and gradual manner.”
Other suggested measures signatories to such an international treaty could introduce are tax-exempt “CoVictory bonds” as well as targeted tax cuts (Clean Tax Cuts, CTCs) in the four sectors responsible for 80% of greenhouse gas emissions—transport, energy and electricity, industry, and real estate. Tax cuts aimed at breaking up monopolies are another possible measure.
Even if no such treaty would be forthcoming, the EU’s new climate tariff, the so-called carbon border adjustment mechanism or CBAM, is causing great concern at gatherings like the G20. India in particular has rallied against the idea that the EU would start imposing tariffs on imports from trading partners simply because these countries prefer not to copy the EU’s costly climate policies. The UK is currently considering whether to copy CBAM or not, as it fears that it may lose market access to the EU if it does not. Researchers of the UK Growth Commission have warned against it, estimating that if the UK were to do this, it “could lead to GDP per capita losses of between roughly £150 and £300”, or even up to £650, in case supply chains would realign around the lowest cost producers.
Mercosur
On the sidelines of the G20, one can expect there to have been lots of coordination between EU member states and the members of the Latin American trade bloc Mercosur about the possible finalisation of the EU-Mercosur trade deal. France has been pushing hard against this but is not sure it will be able to find a blocking minority.
In theory, a deal should have already been reached, but the EU decided to reopen the talks, suddenly requesting that their Latin American trading partners respect a whole range of extra environmental conditions. Understandably, they resisted this. On top of that came protests, particularly from Brazil, against the EU’s deforestation regulation, which imposes all kinds of extra bureaucratic requirements on imports deemed to worsen deforestation. In particular, it is problematic that the legislation refuses to recognise anti-deforestation standards from trading partners. Malaysia and Indonesia, specifically, found it unfair that, despite NGOs like Global Forest Watch praising them in 2023 for achieving a sharp reduction in forest loss, the EU refuses to declare their standards as equivalent, unlike the UK.
Last week, the European Parliament voted to postpone the regulation for one year, after Brazil and the United States had demanded they do so. MEPs noted that countries enjoying ‘no risk’ classification “would face significantly less stringent requirements as there is a negligible or non-existent risk of deforestation.” The Malaysian Palm Oil Council (MPOC) has pointed out that the creation of such a ‘no risk’ category “could provide a convenient off-ramp for legislators to exempt domestic companies from the legislation, which smacks of economic protectionism.”“A two-tiered approach to regulation—protecting European companies while penalising their international trade partners—would send the wrong message to the world, given that countries like Malaysia have worked so hard to comply with EUDR,” the MPOC said. Brazil’s farmers’ federation echoed similar concerns.
It truly shows that long gone are the days when the EU was a powerful actor pushing to open up trade at the international level. Also, in the upcoming negotiations on the extra U.S. tariffs Trump wants to impose, he will most certainly point out that at the moment, EU tariffs are actually higher than U.S. tariffs.
To be fair, at the top levels of the European Commission, some people are slowly realising that the EU is on the wrong road. In Spring, Sabine Weyand, the leading official at the EU Commission’s trade department, gave a speech admitting that trading partners are increasingly questioning the EU’s use of trade policy to act as a “global regulator,” stating: “The Global South and the emerging and developing economies, they do not simply want to copy our legislation and they say, who has appointed you world regulator? So I think we have to take on regulatory cooperation. We have to take a proper cooperative approach.”
On many occasions, such a “cooperative” approach starts with the EU simply scrapping its burdensome and protectionist regulation.
