Japan and G20 Finance, Trade and Digital Economy Ministerial Meetings 2019
Japan Watch Project Analyst By Reni Juwitasari
On the last June 8 to 9, the Group of Twenty (G20) Finance Ministers and Central Bank Governors held a ministerial meeting taking place in Fukuoka Prefecture to talk in parallel with another Ministerial Meeting on Trade and Digital Economy in Tsukuba City. The Finance Ministerial Meeting focused on international taxation, global imbalances, aging demography and policy implication, infrastructure investment and financial technology and innovation, meanwhile the Ministerial Meeting on Trade and Digital Economy emphasized on global economic growth, international trade and investment. Fukuoka was chosen to be a venue for the Finance Ministers and Central Bank Governors Meeting as consideration of Fukuoka City designated as “National Strategic Special Zone for Global Startups and Job Creation”. Japanese Government promoted its government-industry initiatives, such as reducing taxes on startups. Concurrently, Tsukuba in Ibaraki Prefecture as located between mountains and oceans was considerably selected as a venue of Trade and Digital Economy because the city is one of the world’s leading research and development base. In addition, this city is Japan’s representative of global industrial companies, small and medium-sized enterprises, and its basic technology and regional economy. Therefore, the Japanese government wanted to show the high technology level of railway network in the land, and other transportation network on the sea and in the air. Those ministerial meetings were attended by G20 countries members, together with the Central Bank Governors, the Finance Minister of the EU presidency country, representatives from Chile, Egypt, Netherlands, Senegal, Spain, Switzerland, including three ASEAN countries, Singapore, Thailand and Viet Nam, as well as representatives of international organizations, such as IMF and World Bank, while in the Trade and Digital Economy Ministerial Meeting there appeared representatives from Egypt, Estonia, Netherlands, Nigeria, Senegal, Spain, including two ASEAN countries, Singapore and Viet Nam as well as other international organizations WTO, IMF, World Bank and UNCTAD.
The Finance Ministers and Central Bank Governors Ministerial Meeting started with a symposium on International Taxation with a theme of “For a Globally Fair, Sustainable and Modern International Tax System” as Japan aimed to facilitate constructive discussion on a range of international tax issues. Firstly, challenges to tax issue has been arising from digitalization which innovation and communication technologies has brought significant changes of doing business, for example, operating without a physical presence in a purchaser jurisdiction. This practice has posed challenges to the traditional rules of international taxation. However, the method to respond to it must be in accordance with two pillars of the 2016 inclusive Framework of Base Erosion and Profit Shifting (BEPS), focusing upon nexus and profit allocation rules as well as tackling the remaining BEPS issues. Secondly, G20 members highlighted on-going efforts to counter tax avoidance and evasion. They remarked that, although the implementation of BEPS project just recently begun to monitor harmful tax practices, treaty shopping, Country-by country Reports and dispute resolution has noticeable progress. Furthermore, the global imbalance was also another important topic as the U.S. and China has been in the trade war tension which the U.S. trade deficit is arguably stated because of unfair customs and competitive devaluation engaged in by trade partners. In this case, Japan also aimed to lead the discussion to explore and guard against the world economy risks as it was implied that Japan was doing the United States a favor to do little improve the situation of trade war. Another discussed topic was the problem of ageing population by seminar on “Financial Innovation Our Future in the Digital Age”. At last, the meeting was ended by a communique on commitment of trade and geopolitical tension risks prevention which will be proposed in coming G20 Leader Osaka summit on June 28-29.
The Ministerial Meeting on Trade and Digital Economy began by discussing the needs to achieve the objectives for global growth, international trade and investment continuity as it can develop engines of growth, productivity, innovation and job creation. With the assumption that digitalization is able to benefit for economies and societies as whole, then, to enhance the benefit for the society, the G20 Ministers emphasized the issue of human-centered future society, in particular the role of human, especially in Japan, for the business activity under the significant adverse effect caused by aging population acceleration. Japan, as the host, promoted Society 5.0 which is a vision of human-center future society in accordance with Sustainable Development Goals (SDGs) of convergence of the physical world and the virtual world to cope with economic growth and solve social challenges. Hence, Japan has been using the emerging technologies, such as artificial intelligence (AI), fifth-generation mobile telecommunication technologies (5G), the Internet of Things (IoT) and Distributed Ledger Technologies that can empower further inclusiveness for individuals and firms. Moreover, this Ministerial Meeting also reaffirmed its commitment to strengthen the public’s confidence in digital technologies and encouraged governance innovation as the digital era is challenging for the governance to maintain legal policy and innovation-friendly. In the Meeting, Japan facilitated discussion on how the technology can be better incorporated into policy tools. Moreover, this discussion also committed to against internet for violent extremist and terrorist financing. The infrastructure investment was also discussed to achieve Sustainable Development Goals and Inclusion with “no one left behind”. Based on this, the Ministers continued the support of equality for women and girls as well as persons with disabilities in the digital economy in order to strengthen economic growth, innovation, inclusiveness and societal well-being.
In both Ministerial Meetings, serious concern about the current tensions surrounding trade between the U.S. and China in light of “America First” policy since 2017 was expressed. It was reported that although G20 representatives confirmed their needs in resolving trade frictions, the statement during the meeting did not contain a vow to fight against protectionism, which in contrast to the previous G20 Finance Chiefs Meeting in Argentina serving as a forum for finance leaders to voice their opposition to protectionism. It seems that this year G20 summit will be overshadowed by the debate of the U.S. and China trade war.
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