Finance chiefs of the world’s largest economies set aside a previous pledge to avoid protectionism and signed up to a fudged statement on trade instead, in response to the Trump administration’s call for a rethink of the global order for commerce.
The Group of 20 nations, meeting in Germany on Saturday, said in a communique that they are “working to strengthen the contribution of trade to our economies.” That’s a much pared-down formulation compared with the group’s statement last year, and also omits a promise to “avoid all forms of protectionism.”
In two days of meetings in Baden-Baden, delegates split under the pressure of the new U.S. rhetoric on the balance of global trade, with most favoring a multilateral, rules-based system as currently embodied in the World Trade Organization. The U.S., represented by Steven Mnuchin in his first appearance at an international forum as Treasury Secretary, argued that trade arrangements need to be made fairer, in line with the administration’s claims the U.S. has had a bad deal from the current setup.
The impasse reflects the atmosphere the previous day at the White House, where U.S. President Donald Trump met German Chancellor Angela Merkel and repeated his complaints that his country has been treated “very, very unfairly” in trade arrangements.
“We met at a time when the global economic recovery is progressing,” the official communique stated. “But the pace of growth is still weaker than desirable and downside risks for the global economy remain. We reaffirm our commitment to international economic and financial cooperation.”
While delegates greeted Mnuchin and said that he had been engaged in the process, it wasn’t possible to reconcile the U.S. stance and that of the other members in any substantive way. Officials may continue to seek greater consensus on trade between now and the G-20 leaders summit in Hamburg in July.
The communique also committed to “further strengthening the global financial architecture” and said members support work to finalize the Basel III framework on bank regulations. It dropped a reference to climate change, in the face of resistance from countries including the U.S., China, India and Saudi Arabia.
G-20 Drops Anti-Protectionist, So-called 'Free-Trade' & Climate-Change Funding Commitment
This would break with a decade-old tradition among the finance ministers and central bankers of the world's 20 top economies (G20), who over the years have repeatedly rejected protectionism and endorsed free trade.
But the new administration in the United States is considering trade measures to curb imports with a border tax and would not agree to repeat the formulations used by previous G20 communiques, clashing with China and Europe, the officials said.
"Unless there is a last minute miracle, there is no agreement on trade," one official, who declined to be named, told Reuters. "This is not a good outcome of the meeting," a G20 delegate quoted Bundesbank President Jens Weidmann as saying.
The new communique said: “We are working to strengthen the contribution of trade to our economies. We will strive to reduce excessive global imbalances, promote greater inclusiveness and fairness and reduce inequality in our pursuit of economic growth.”
The watered-down commitments on free trade reflected the anti-globalisation mood that Donald Trump has brought to Washington and came in the first G20 meetings between Steven Mnuchin, the new US Treasury Secretary, and his foreign counterparts.
US Treasury Secretary Mnuchin spoke to reporters after the meeting:
MNUCHIN: LOOKING FORWARD TO WORKING CLOSELY W/ G-20 COLLEAGUES
MNUCHIN: CONFIDENT US CAN WORK CONSTRUCTIVELY WITH PARTNERS
MNUCHIN: US BELIEVES IN FREE, BALANCED TRADE
MNUCHIN SAYS WILL LOOK AT TRADE SURPLUSES WITH VIEW TO CORRECT
MNUCHIN SAYS MULTILATERAL AGREEMENTS HAVE VERY IMPORTANT PLACE
MNUCHIN SAYS US WANTS TO RE-EXAMINE TRADE DEALS INCLUDING NAFTA
MNUCHIN: US BELIEVES IN APPROPRIATE REGULATION
MNUCHIN SAYS IMPORTANT BANKS CAN PROVIDE LIQUIDITY IN MARKETS
Reuters also points out another potential win for Trump as the communique will also drop a reference, used by the G20 last year, on the readiness to finance climate change as agreed in Paris in 2015 because of opposition from the United States and Saudi Arabia.
Trump has called global warming a "hoax" concocted by China to hurt U.S. industry and vowed to scrap the Paris climate accord aimed at curbing greenhouse gas emissions.
Trump's administration on Thursday proposed a 31 percent cut to the Environmental Protection Agency's budget as the White House seeks to eliminate climate change programs and trim initiatives to protect air and water quality.
Asked about climate change funding, Mick Mulvaney, Trump's budget director, said on Thursday, "We consider that to be a waste of money."
