Financial leaders of the world’s biggest economies have dropped a pledge to keep global trade free and open, acquiescing to an increasingly protectionist United States after a two-day meeting failed to yield a compromise.
The move has led to warnings of the risk of protectionism to trading economies such as Ireland’s.
Breaking a decade-long tradition of endorsing open trade, G20 finance ministers and central bankers made only a token reference to trade in their communiqué on Saturday, a clear defeat for host nation Germany, which fought the new US government’s attempts to water down past commitments.
The development led to warnings over the weekend on the outlook for trade, a key issue for host nation Germany and for other countries which rely significantly on exports, including Ireland.
Ibec director Pat Ivory warned that “rising protectionist rhetoric and action in the political arena pose imminent threats to current bi- and multilateral trade negotiations. This risks undermining the achievements of liberalisation of cross-border goods and services flows, and raises concerns about the future of the global trading order”.
The G20 statement appeared to “water down a shared commitment to open markets and free trade”, Dr Ivory said, saying that the OECD, where he is vice-chair of an advisory committee on trade, could play a key role in promoting the free-trade agenda.
Prosperity
International experts also issued warnings in the wake of the G20 meeting. “The weak wording on trade is a defeat for the German G20 presidency,” Ifo economist Gabriel Felbermayr said. “This is particularly true in the light of the fact that Germany is one of the world’s strongest export nations and relies on open markets to maintain its prosperity like hardly any other country.”
The Association of German Chambers of Commerce and Industry (DIHK) said the token reference to trade was a serious setback for the multilateral trade order.
“The result is a warning shot for every trading nation and this means also for the German economy,” DIHK foreign trade economist Volker Treier said.
In the new US administration's biggest clash yet with the international community, G20 finance chiefs also removed from their statement a pledge to finance the fight against climate change, an anticipated outcome after US president Donald Trump called global warming a "hoax".
In a meeting that some said was at times 19 against one, the US did not yield on key issues, essentially torpedoing earlier agreements as the G20 requires a consensus. Still, the dialogue was friendly and non-confrontational, leaving the door open to a future deal, said officials who attended the meeting.
"This is my first G20, so what was in the past communiqué is not necessarily relevant from my standpoint," US treasury secretary Steven Mnuchin said in the German resort town of Baden Baden.
“I understand what the president’s desire is and his policies, and I negotiated them from here,” Mr Mnuchin said. “I couldn’t be happier with the outcome.”
July meeting
Seeking to put “America first”, Mr Trump has already pulled out of a key trade agreement and proposed a new tax on imports, arguing that certain trade relationships need to be reworked to make them fairer for US workers.
“We believe in free trade, we are in one of the largest markets in the world, we are one of the largest trading partners in the world, trade has been good for us, it has been good for other people,” Mr Mnuchin said. “Having said that, we want to re-examine certain agreements.”
International trade makes up almost half of global economic output and officials said the issue could be revisited at a meeting of G20 leaders in July.
While some expressed frustration, like French finance minister Michel Sapin, others played down the dispute.
“It is not that we were not united,” German finance minister Wolfgang Schäuble said. “It was totally undisputed that we are against protectionism. But it is not very clear what [protectionism] means to each [minister].”
He added that some ministers did not have a full mandate to negotiate since they were not fully in charge of trade issues.
Others suggested that the G20 leaders’ meeting in Hamburg this July could be the real opportunity to bring the US on board.
– (Reuters)
