G20 finance ministers meet as America First casts pall

Hui Min NEO and Tom BARFIELD
 

Finance ministers from the world's biggest economies sat down for tense talks in Germany on Friday, formally engaging in a battle of wills over the future of the global free-trade system which ranges a newly forthright US against historic allies.

President Donald Trump has already torn up a trans-Pacific free trade pact, threatened punitive tariffs against multinationals with factories outside the United States and attacked "currency manipulation" by export giant China.

And his stated aim of keeping jobs at home by making it costly for American companies to outsource is dominating talks at the G20 gathering of finance ministers and central bankers in the western German spa town of Baden-Baden.

Trump's emissary, US Treasury Secretary Steven Mnuchin, is being scrutinised by Washington's key trading partners for clues on whether the world's biggest economy fully intends to abandon its long-standing support of open markets and free trade.

"We want a positive declaration in favour of free trade," the European Union's economy commissioner, Pierre Moscovici, told AFP on the sidelines of the meeting, "to note that that's the framework the globe's economic life must be organised within."

The US was at odds with other delegations over whether to include such language in the text of a final communique signed by all participants, a source close to the talks told AFP earlier Friday.

Meanwhile, German Chancellor Angela Merkel arrived at the White House for her first visit with Trump around the same time the ministers were sitting down in Germany, amid expectations she will make a strong push for open markets.

- 'Buy American, hire American' -

Slow growth and halting economic reform could be blamed for "a backlash against globalisation," OECD head Angel Gurria said in Baden-Baden as he presented a report urging nations to spread the proceeds of growth more widely.

Trump was elected on the back of exactly such a political storm over deindustrialisation in vast areas of the United States.

He declared in his inauguration speech that "we will follow two simple rules: buy American and hire American."

Those caught in the crosshairs include German luxury carmaker BMW (EUREX: BMWE.EX - news) , against which Trump has threatened punitive taxes of 35 percent if it does not back down on building a factory in Mexico.

The rhetoric has alarmed key trading partners, including export giants China and Germany.

On Thursday, following talks with German Finance Minister Wolfgang Schaeuble, Mnuchin said Washington had no desire to fight "trade wars" with other economic powers.

"Our desire is that? when there is imbalances in trading relationships that we have a need to address that," Mnuchin said after the pair met in Berlin.

Mnuchin said Trump's administration would keep a close eye on the levels of key global currencies, but pursue policies in the interest of "economic growth that is good for the US and the rest of the world".

- Clouds over climate change -

Meanwhile, a new issue appeared to have emerged over Trump's stance on climate change, with sources saying that the US delegation is resisting wording in the final communique on the issue.

A source close to the talks said US negotiators appear to be unable to commit due to an absence of mandate from Washington.

On Thursday, Trump proposed to take the axe to environmental financing, slashing funds for the Environmental Protection Agency (EPA) by a third, as well as eliminate contributions linked to the UN climate change programmes in his first national budget.

But Moscovici noted that "we are not here to talk about the domestic policy of this or that member state, we are here to talk about what we can do together."

"It is essential that we affirm that common principles here so that the process can continue to advance," he told AFP.

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