G20 pledges ‘inclusive’ economic growth, but payoff will take time
RESOLVE: ‘We underscore the role of open trade policies and a strong and secure global trading system’
CHENGDU, China: Global finance officials, jolted by growing anti-trade and economic nationalism movements behind Britain’s vote to leave the European Union and Donald Trump’s US presidential campaign, are intensifying pledges for more “inclusive” growth.
But some Group of 20 officials and analysts say this will be a long-term project.
Certainly, the benefits of these efforts are unlikely to be seen quickly enough to influence US voters in the November presidential election, where both Republican Trump and Democrat Hillary Clinton have declared their opposition to the 12-country Trans-Pacific Partnership free trade deal.
After a two-day meeting in Chengdu, China, G20 finance ministers and central bank governors prominently pledged to pursue policies that promote economic “inclusiveness” and preserve an open trading system, significantly strengthening previous statements on the subject.
“The benefits of growth need to be shared more broadly within and among countries to promote inclusiveness,” the G20 officials said in a communique issued on Sunday.
“We underscore the role of open trade policies and a strong and secure global trading system in promoting inclusive global economic growth, and we will make further efforts to revitalise global trade and lift investment,” the G20 said.
That is in stark contrast to Trump’s acceptance speech at the Republican National Convention last week, where he promised to be a voice for Americans who have been “ignored, neglected and abandoned.”
“The TPP will not only destroy our manufacturing, but it will make America subject to the rulings of foreign governments,” Trump said.
“I pledge to never sign any trade agreement that hurts our workers, or that diminishes our freedom and independence. Instead, I will make individual deals with individual countries.”
Trump also has threatened punitive tariffs on imports from China and Mexico and says he will renegotiate the North American Free Trade Agreement despite 22 years of company supply-chain integration between the United States, Canada and Mexico.
And Clinton’s running mate, Senator Tim Kaine of Virginia, on Saturday declared his opposition to the TPP deal in its current form, just a week after making some positive comments about the deal’s “high standards”.
This puts him in line with Clinton, who says she wants to renegotiate TPP, and eliminates another potential “yes” vote should Congress attempt to ratify the deal later this year.
US Treasury Secretary Jack Lew told a news conference on Sunday that the UK Brexit vote pushed a lingering problem to the top of the G20 agenda.
“In the wake of Brexit, there was a need to focus on inclusive growth. It’s important that was a subject of discussion here.”
The shift by the G20 is an acknowledgement by global economic stewards that there is a strong and fast-growing movement towards economic nationalism globally that threatens protectionism, said Paul Sracic, political science professor at Youngstown State University in Ohio’s Rust Belt.
“It’s a first step but it’s too little, too late,” Sracic said of the G20 statement in a phone interview.
“The next US administration, no matter which party, is not going to be as friendly to global economic relationships as the Obama administration has been. The politicians are going to follow the voters.”
David Lipton, the International Monetary Fund’s first deputy managing director, said while it would take time to turn around a “rising tide of populism”, G20 countries needed to act to ensure globalisation remained an engine of future growth.
“Can it be done quickly? Probably not, but on the other hand, if we get a good start, I think it will be more credible in showing that the system is worth maintaining and pursuing,” Lipton said.
He added there were many policies that could promote greater inclusion in G20 economies, such as better retraining programs for workers displaced by trade, progressive income taxes on the wealthy and tax credits for the working poor, along with infrastructure spending on public transportation, which, among other benefits, allows people to affordably travel to jobs.
Lipton also said other countries may not be able to follow China in improving living standards and developing into major growth engines if global interconnectedness were to suffer.
But Chad Bown, former World Bank economist and a senior fellow at the Peterson Institute economics think-tank, said policies needed to spread the benefits of growth more equitably will vary widely between countries, making it very difficult to achieve.
“G20 efforts to make growth more inclusive are never too late,” he said. “However, pulling it off may be one of its most difficult endeavours.”