US stance on trade forces rest of G20 to wait

Finance ministers from the world’s leading economies had gone into this weekend’s G20 meeting in the spa town of Baden-Baden eager to ease their most powerful member closer to the centre ground. But Steven Mnuchin could not be moved.

The US treasury secretary, according to Germany’s finance chief Wolfgang Schäuble, appeared to have “no mandate” to settle his country’s position on one of the most pressing issues facing the G20 nations: free trade and protectionism. “We have reached an impasse,” Mr Schäuble said, later adding: “We did go to great lengths, we tried everything, we went down many avenues together and unilaterally.”

Just over five weeks into his new job, Mr Mnuchin’s freshness bought him time with some delegations who were quick to say it was unfair to expect him to have defined a clear position on such an important issue as trade so quickly.

But with the US refusing to budge, the official summit communiqué dropped tougher language from last year that vowed to “resist all forms of protectionism”.

FBI investigating Trump campaign contacts with Russia, says chief

---

Hillary Clinton says she is ‘ready to come out of the woods’

---

America Letter: Trump a masterclass in humbug

---

Trump stands by wiretap claims in tense meeting with Merkel

---

Trade

For some G20 partners the refusal of the US to commit clearly to free trade marked the first step down a dangerous road. For others, agreeing to omit stronger language was a recognition that major battles lie ahead within the US administration over its economic nationalism, and there was no point staging a major confrontation over the topic early in the presidency.

The most immediate problem for the rest of the G20 is that they head into the summit of leaders, in Hamburg in July, with tremendous uncertainty over whether they can bring the US into the fold. The question now is, if Mr Mnuchin could not be persuaded to adopt a more conciliatory tone on trade, then what chance do they have with his boss Donald Trump?

The delegations described the approach of their newly confirmed counterpart as level-headed. Pierre Moscovici, European commissioner for economic affairs, said Mr Mnuchin had come as a man who wanted constructive engagement, adding he had been easy to talk to and displayed a “positive approach”.

Yet for all this, the usual language of the G20 to shun protectionism was replaced by much weaker wording that members were “working to strengthen the contribution of trade to our economies”.

Mr Trump has made his position clear on what this work would involve. Negotiations had left the US with a raw deal, he said on Friday in a press conference with visiting German chancellor Angela Merkel, and he would fight for “fairer” trade deals to “even out” the relationship.

“Right now I would say the negotiators for Germany have done a far better job than the negotiators for the US,” Mr Trump said. Ms Merkel responded that it was the EU that negotiated on behalf of Germany, but Mr Trump’s remark serves as a reminder of the new US administration’s scepticism about globalisation.

Advocates

There is still hope among advocates of free-trade that moderate voices in the Trump administration will gain influence. Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development, which includes many of the world’s wealthiest nations, said: “Let’s see how the discussion moves. Because . . . we are all making judgments about issues, [FOR]which the only thing we know [is that they] will come out different to what we are assuming.”

In Baden-Baden the US found an ally only in Japan. But the pressure will continue to come not only from Europe but also emerging markets, including a Chinese administration that has been quick to present itself as a voice for global co-operation in the face of belligerence from some in the White House.

The delegation from Beijing were keen to build on president Xi Jinping’s headline-grabbing speech in Davos, where the leader of the communist China made a robust defence of globalisation. They also thought the language to resist protectionism – agreed at last year’s summit of G20 heads of state in China – should remain in the communiqué, until at least the Hamburg gathering agreed otherwise.

Unable to convince Mr Mnuchin in Baden-Baden, the rest of the G20 must now play a waiting game until that July meeting. It will hope that by then the US has decided what it wants to do with its role in a world order it has done more than any other country to shape.

– Copyright The Financial Times Limited 2017