After delays and hours of discussions amid tensions over ‘trade’ comments between the United States and the rest of The G-20, it appears President Trump has ‘won’. While China was “adamantly against” protectionism, the finance ministers end talks without renewing their long-standing commitment to free trade and rejection of protectionism after US opposition.
Finance ministers from the world’s biggest economies on Saturday dropped an anti-protectionist pledge and a vow on action against climate change, after Washington refused to sign up to the commitment.
After a two-day meeting, ministers from G20 developed and developing nations said they were “working to strengthen the contribution of trade to our economies” but failed to spell out a pledge to reject protectionism in a closing statement.
The conspicuous omission came amid a push by US President Donald Trump to pursue an “America First” policy that includes penalising companies that manufacture abroad by heavily taxing their products.
Since taking office, he has withdrawn the US from a trans-Pacific free trade pact and attacked export giants China and Germany over their massive trade surplus.
His stance has sparked alarm among Washington’s trading partners, and led Beijing to issue a stern warning against sparking a trade war.
References to action against climate change under the Paris accord were also scrapped from the G20 statement unlike at a previous summit last year.
Sources said the US delegation could not commit as they had not been given instruction from Washington to do so at the meeting in the western German spa town of Baden-Baden.
The exclusion of climate marked a new setback for environmental action, activists say, after Trump proposed to take the axe to environmental financing.
Under his first national budget proposal, he suggested cutting financial resources for the Environmental Protection Agency (EPA) by a third, as well as eliminate contributions linked to the UN climate change programmes.
The failure by ministers to agree on trade and climate action was met with dismay by France, whose Finance Minister Michel Sapin said: “I regret that our discussions today were unable to reach a satisfying conclusion.”
Where the US has threatened foreign manufacturers with steep import taxes, France “rejects all unilateral protectionist measures”, Sapin added.
“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.
In a partial face-saving move, as The FT details, G20 finance ministers meeting in the German resort town of Baden-Baden noted the importance of trade to the global economy, but dropped tougher language from last year that vowed to “resist all forms of protectionism”.
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 U.S. CAN WORK CONSTRUCTIVELY WITH PARTNERS
- *MNUCHIN: U.S. 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 U.S. WANTS TO RE-EXAMINE TRADE DEALS INCL. NAFTA
- *MNUCHIN: U.S. 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.”
The G20 do agree, however, to show continuity in their foreign exchange policies, using phrases from the past on foreign exchange markets.
Needless to say, such an acrimonous end to the weekend’s summit would likely result in a surge in FX volatility when markets open for trading late on Sunday, reflecting the new state of global trade flux, in which the future of the US Dollar is completely unknown, and reflecting the emerging chaos over the future parameters of trade.
Sources: Yahoo News and Zerohedge