PROTECTIONISM STANCE CHANGE

Draft communique shows it only promises ‘open and fair international trading system’

THE world’s financial leaders may no longer explicitly reject protectionism or competitive currency devaluations, a draft communique of their meeting next week showed, promising only to keep an “open and fair international trading system”.

Finance ministers and central bank heads from the Group of 20 major developed and developing economies will meet next Friday and Saturday in the German town of Baden-Baden to discuss the world economy.

It will be the first meeting of G20 finance ministers attended by representatives of the administration of United States President Donald Trump, who has more protectionist policy views on trade.

The draft communique seen by Reuters, which may change before next Saturday, appears to accommodate the US position.

The draft, dated March 1, drops the phrase adopted by G20 finance ministers last year to “resist all forms of protectionism”.

A warning against protectionism has appeared in G20 communiques for more than a decade.

“The lack of any reference to protectionism in the draft is strange,” said one official close to the preparations for the meeting. “Maybe it is a minimum that everybody could agree on.”

The draft also no longer contains the sentence, used in previous statements, that the G20 should “refrain from competitive devaluations” and should not “target our exchange rates for competitive purposes”.

Instead, it says: “We will maintain an open and fair international trading system” and “We reaffirm our previous exchange rate commitments”.

G20 communiques last year began including a phrase that was part of Group of 7 language for years: “Excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will consult closely on exchange markets.”

This sentence is now also missing from the draft.

Japanese policymakers would not confirm if the language on currencies will change but said any modification wouldn’t mark a departure from the G20’s stance on exchange rates.

“Currencies are important, but it’s too early for me to say any more”, said a government official.

Japan, as well as some other Asian G20 members, fret more about Washington’s protectionist rhetoric and its impact on the G20 debate.

“Protectionism has become the new tsunami and we all have to endeavour to protect ourselves from it,” said an Indian government official who deals with G20 negotiations.

“We will maintain an open and fair international trading system” and “We reaffirm our previous exchange rate commitments.”

G20 draft communique