Consensus in G20 that protectionism 'damaging' for global economy

Heather SCOTT

The Group of 20 major economies sent a united message Friday on the threat that rising protectionism poses to the global economy, an apparent return to a long-time stance called into question by the United States.

Speaking after a meeting of G20 finance ministers in Washington, Germany's Wolfgang Schaeuble said they were now in "broad agreement" that "free trade is better for global growth."

"There was a broad consensus" that "protectionism would be damaging to the global economy and the concerned economies as well," the German minister, whose country holds the rotating G20 presidency, told reporters.

That seemed to mark a striking change of tone since the last finance ministers meeting in Germany, one month ago, when the United States prevented the G20 from including the traditional pledge against protectionism in its final communique, calling the language "irrelevant."

In fact, Schaeuble said Friday's meeting managed to overcome "some of the difficult things" in communications since that meeting, although he did not provide details. It was unclear how far that consensus extended, however, since the group did not release a communique this time.

Rising protectionist and anti-globalization sentiment in key economies has created a tense atmosphere at the normally placid and formulaic gathering of finance ministers in Washington, where the G20 officials met ahead of the semi-annual meeting of the International Monetary Fund.

Concerns have notably been fuelled by President Donald Trump's threats to impose tariffs on countries that have surpluses with the United States, by the British decision to leave the European Union and the anti-internationalist rhetoric in the French presidential election campaign.

- Make growth more 'inclusive' -

The G20 ministers also agreed that economic growth must be made "more inclusive" in order to stem the rise of protectionism, Schaeuble said.

"Many people feel that they do not benefit from the advantage of growth and globalization, and we need to tackle this, otherwise we will see more protectionism and countries retreating from globalization down the road," Schaeuble said.

The IMF has flagged protectionism and possible trade wars as a threat to the global economic recovery, just when it is finally gaining momentum.

German central bank chief Jens Weidmann said the finance ministers "underlined the negative growth effects of raising barriers to trade."

"Almost everybody underscored the importance of open market and free market access," he said.

The G20 must focus more on inclusive growth because "rising inequality puts strain on potential growth" and as a result "people become more disenchanted with globalization," Weidmann said.

To address these issues, Schaeuble said officials had agreed on the "need to do more" to spread the benefits of growth and globalization, which includes investments in education and infrastructure.

That echoes the repeated urgings of IMF Managing Director Christine Lagarde who this week has turned up the volume on the call to wealthy countries to help those left behind by global prosperity.

- US policy undecided -

Despite the apparent progress within the meeting, the German finance minister deflected repeated questions about the stance of the United States, especially on trade policy and rolling back financial regulation.

Treasury Secretary Steven Mnuchin told his counterparts the incoming administration has not made any decisions on specific policies, and the officials said there was no discussion based on speculation.

On the issue of financial regulation, Weidmann said there was consensus about continuing the reforms agreed previously and there were few fears about the risk of seeing erosion of the regulations implemented in the wake of the 2008 crisis.

The "debate about the regulatory 'race to the bottom' has disappeared" from the G20 discussions, Weidmann said.

But despite their efforts to tamp down concerns about US policies, Trump on Friday signed an order directing Mnuchin to review the Dodd-Frank financial regulations erected in the wake of the crisis.

During the campaign, Trump pledged to dismantle Dodd-Frank although Mnuchin said Thursday the administration does not want to get rid of all regulation, but to ensure they are not overly burdensome or preventing banks from lending.