G20 draft to keep an ‘open and fair international trading system’

BRUSSELS: 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 on March 17 to 18 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 US President Donald Trump, who has more protectionist policy views on trade.

The draft communique seen by Reuters, which may change before March 18, appears to accommodate the new 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. The G7 groups Britain, Canada, France, Germany, Italy, Japan and the US. G20 countries “are fighting a rearguard action to deflect the protectionist approach” of the Trump administration, said Eswar Prasad, the former head of the International Monetary Fund’s China department who is now a trade and economics professor at Cornell University.

“The G20 is clearly struggling to find a way to stick to its previous policy statements on these issues in the face of hostility from the new US government,” Prasad added.

Nathan Sheets, a former US Treasury undersecretary for international affairs in the Obama administration, said the early March 1 draft will likely change substantially before it is published, subject to “a lot of back and forth.” — Reuters