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G20 economies yield to U.S.

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The world's top economic powers dropped a pledge to oppose trade protectionism amid pushback from the Trump administration, which wants trade to more clearly benefit American companies and workers, reported Boston Herald (US).

Finance ministers from the Group of 20 countries meeting in the southern German town of Baden-Baden issued a statement Saturday that said only that countries "are working to strengthen the contribution of trade" to their economies.

By comparison, last year's meeting called on them to resist "all forms" of protectionism, which can include border tariffs and rules that keep out imports to shield domestic companies from competition.
The statement from the G20 finance ministers and central bankers helps set the tone for further global economic cooperation.

U.S. Treasury Secretary Steven Mnuchin, taking part in his first international meeting since being sworn in, sought to downplay the wording issue. He said that the statement needed to reflect the discussion at the current summit. "The historical language was not really relevant," he said.

"We believe in free trade: we are one of the largest markets in the world, we are one of the largest trading partners in the world," Mnuchin said. "Having said that, we want to re-examine certain agreements... And to the extent that agreements are old agreements and need to be renegotiated we'll consider that as well."
He said trade deals need to offer a "win-win situation."

Mnuchin said the administration would be looking at relationships where the U.S. was buying more than it could sell to its partner, and would be more aggressive in seeking enforcement of existing rules that would benefit U.S. workers through the Geneva-based World Trade Organization. The WTO operates a system of negotiated trade rules and serves as a forum for resolving disputes.

China and European countries had pushed for a stronger affirmation of cross-border trade without tariffs or barriers. Ironically, China and some European states tend to intervene more often in private sector business than the U.S. government.
Canada took a middle approach in the talks, urging a statement supporting free trade but not taking a position on specific wording.

Host Germany dropped the no-protectionism pledge in the early drafting process ahead of the meeting, in apparent hope of not antagonizing the U.S. and then finding a substitute that would also uphold free trade. But attempts to include such language did not find agreement.

Trump and other critics of free trade argue that it can cause jobs, such as in the labor intensive manufacturing sector, to move to lower-cost countries. Proponents say technological advances, such as automation that replaces workers with robots, are more to blame for the loss of jobs in such sectors.

Some advocates, like the International Monetary Fund, readily concede that the benefits of free trade have been uneven across societies, as less skilled workers lose out and the better trained prosper. But they argue that trade restrictions will not help those left behind by the globalized economy and point to better training and education as part of the answer.

Trump has already pulled the U.S. out of a proposed free trade deal with Japan and other Pacific Rim countries. He also has started the process to renegotiate the North American Free Trade Agreement with Mexico and Canada.

Wolfgang Schaeuble, the finance minister of host country Germany, argued that it was not true that officials failed to find common ground. "It's completely clear we are not for protectionism. But it wasn't clear what one or another meant by that," he said.

The G-20 is an informal forum on economic cooperation made up of 19 countries plus the European Union. The finance ministers' meeting will pave the way for a summit of national leaders in Hamburg, Germany, on July 7-8. Its decisions don't have the same force as an international treaty but simply depend on individual countries' promises to follow through on them.


The leading global economies just found out that they now live in a different world: That of Donald Trump, reported Politico (EU, Brussels).
At a meeting of policymakers from the Group of 20 major economies around the world on Friday and Saturday, they were forced to drop their long-standing commitment “to resist all kinds of protectionism” in their communiqué because of U.S. opposition. No one is sure what comes next.

The language on trade had been the main sticking point at the two-day meeting of G20 finance ministers and central bankers. They managed to agree only at the last minute on the vague phrase that countries will work “to strengthen the contribution of trade to our economies.”

G20 partners are keen to maintain the current system of multilateral trade agreements governed by the rules of the World Trade Organization. But the new U.S president, who has promised to put “America First,” has made no secret of his disdain for multilateral trade deals that he says have treated America unfairly. He has already scrapped the Obama administration’s proposed Trans-Pacific Partnership.

While watering down their commitment to trade, the guardians of the world economy failed to agree on how things should look like in the future. And for many policymakers who traveled to this picturesque German town, the talks that just ended must have felt like a looking-glass experience, with countries like China and Brazil trying to convince the U.S. of the merits of the very economic order that America had created.

U.S. Treasury Secretary Steven Mnuchin doubled down on Trump’s message when he addressed his G20 colleagues, but failed to elaborate on how the system should be adjusted. All he said was trade is only fair when it’s balanced.

“Mnuchin was the first country representative to speak at the so-called global economy session; everyone around the table who spoke after him stood up for free trade,” a G20 delegation source said, adding that Brazil reminded all of the dark days of protectionism. “It is a strange world when Brazil and China lecture the U.S. on free trade,” the official said.

Then, when given the floor, French Finance Minister Michel Sapin yielded to the European Commission’s representative to speak on behalf of the Europeans. It was a powerful gesture of solidarity against Trump’s trade team, which has suggested that it might turn to individual EU member countries, rather than Brussels, when talking trade.

The mood in Baden-Baden’s neo-classical 1824 Kurhaus was not all that gloomy, people present said — even though Saturday’s meeting was held in the wake of a tense press conference by German Chancellor Angela Merkel and Trump in Washington, which had raised questions about the health of transatlantic relations.

Optimism prevailed over the global economic outlook, delegates made a clear commitment to free-floating exchange rates, and progress was made on other key issues such as the fight against international tax avoidance and cyberattacks.

Helping to lighten the atmosphere was the use of the Black Forest’s best-known export, the cuckoo clock, rather than the traditional red light, to signal when speaking time was up, two G20 sources said.
In the end, key players stressed different parts of the communiqué.

“It is totally undisputed that we are against protectionism, but it is not clear what we all mean by that,” German Finance Minister Wolfgang Schäuble said at the press conference following the meeting, adding that Mnuchin did not have the authority to get creative on trade language.

Mnuchin, for his part, said he “couldn’t be happier with the outcome,” as the new language makes sense and the Trump administration doesn’t feel bound by old communiqués.

Sapin, however, expressed his regret that no deal had been found on trade or climate change.
Many participants said at some point the U.S. has to start telling its partners what it wants, and hoped the change in venue from the quaint Black Forest to all-business Washington will do the trick. One source said the International Monetary Fund’s upcoming spring meeting there should be watched closely.

As delegates left town, the overall mood was clearly one of apprehension. “I don’t remember such difficult talks on such an important issue in G20 history,” a veteran of the meetings said.
But if Trump’s goal was to shake up the G20’s hitherto unquestioned consensus, he has clearly succeeded.

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Tags: u.s., EU, G20 group
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