LEAD­ERS SET TO REAFFIRM FOREX COM­MIT­MENTS

But they may strug­gle to present united front on pro­tec­tion­ism, draft com­mu­nique shows

New Straits Times - - Business -

BADEN-BADEN (Ger­many)

THE world’s fi­nan­cial lead­ers will re­nounce com­pet­i­tive de­val­u­a­tions and warn against ex­change rate volatil­ity, but they have not yet found a com­mon stance on trade and pro­tec­tion­ism, a draft state­ment of their meet­ing in Ger­many showed yes­ter­day.

The fi­nance min­is­ters and cen­tral bank gov­er­nors of the world’s 20 largest economies may strug­gle to present a united front on pro­tec­tion­ism after the new ad­min­is­tra­tion of United States Pres­i­dent Don­ald Trump be­gan con­sid­er­ing im­pos­ing a bor­der tax that would make im­ports more ex­pen­sive.

A G20 draft com­mu­nique, which may still change and is to be pub­lished only to­day, also said mon­e­tary pol­icy will keep sup­port­ing growth and price sta­bil­ity but can­not alone lead to bal­anced eco­nomic growth.

“We re­it­er­ate that ex­cess volatil­ity and dis­or­derly move­ments in ex­change rates can have ad­verse im­pli­ca­tions for eco­nomic and fi­nan­cial sta­bil­ity,” the draft com­mu­nique, seen by Reuters, said.

“We will con­sult closely on ex­change mar­kets. We reaffirm our pre­vi­ous ex­change rate com­mit­ments in­clud­ing that we will re­frain from com­pet­i­tive de­val­u­a­tions and we will not tar­get ex­change rates for com­pet­i­tive pur­poses,” it said.

Th­ese sen­tences were miss­ing from the ear­li­est draft com­mu­nique, but have been re-in­serted on the in­sis­tence of sev­eral G20 gov­ern­ments and in­sti­tu­tions so as not to alarm mar­kets that a pol­icy change was un­der way.

But the draft, for now, makes no ref­er­ence to trade and pro­tec­tion­ism is­sues, break­ing with a decade-old tra­di­tion of G20 com­mu­niques which have, over the years, used var­i­ous for­mu­la­tions to en­dorse free trade and re­ject pro­tec­tion­ism.

US Trea­sury Sec­re­tary Steven Mnuchin said on Thurs­day in Berlin that the Trump ad­min­is­tra­tion has no de­sire to get into trade wars, but cer­tain trade re­la­tion­ships need to be re-ex­am­ined to make them fairer for US work­ers.

Ger­man Fi­nance Min­is­ter Wolf­gang Schaeu­ble said the pro­tec­tion­ist US stance could force the G20 to leave out trade from the state­ment al­to­gether. Reuters

Steven Mnuchin

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