Trea­sury to brief al­lies on Trump poli­cies

The Progress-Index Weekend - - BUSINESS - By David McHugh and Martin Crutsinger

BARI, Italy — Top fi­nance of­fi­cials from seven ad­vanced economies have gath­ered to hear more about U.S. Pres­i­dent Don­ald Trump’s eco­nomic poli­cies on tax­a­tion and trade as well as to look for ways to pro­mote growth, com­bat ter­ror­ist fi­nanc­ing and stop tax avoid­ance by ma­jor cor­po­ra­tions.

The meet­ing of the Group of 7 fi­nance min­is­ters in the south­ern Ital­ian sea­side town of Bari is to kick off Fri­day with a dis­cus­sion of how to make eco­nomic growth ben­e­fit more peo­ple. U.S. Trea­sury Sec­re­tary Steven Mnuchin is due to ex­plain Trump’s plans to cut busi­ness taxes and reg­u­la­tion, as well as the pres­i­dent’s push for what he con­sid­ers more bal­anced trad­ing re­la­tion­ships.

The group is gath­er­ing with the global econ­omy show­ing steady growth. There are con­cerns that the econ­omy has not reached the lev­els seen be­fore the global fi­nan­cial cri­sis, and that la­bor pro­duc­tiv­ity con­tin­ues to lag. In­creas­ing out­put per worker is key to gen­er­at­ing growth, and economists say it may be held back by busi­nesses’ re­luc­tance to in­vest in plants and equip­ment due to lin­ger­ing fear from the Great Re­ces­sion, as well as un­cer­tainty about new reg­u­la­tions.

In the­ory, cor­po­rate tax cuts and dereg­u­la­tion along the lines pro­posed by Trump could ad­dress some of those prob­lems in the world’s largest econ­omy. But the de­tails, and to what ex­tent those poli­cies will be im­ple­mented, re­main un­clear.

Dur­ing his pres­i­den­tial cam­paign, Trump re­peat­edly charged that past ad­min­is­tra­tions had failed to take a tough stand on en­forc­ing trade agree­ments and this fail­ure had cost mil­lions of good-pay­ing fac­tory jobs and re­sulted in an enor­mous U.S. trade deficit. Since tak­ing of­fice, his ad­min­is­tra­tion has is­sued a re­port that names two G-7 coun­tries, Ger­many and Ja­pan, for spe­cial mon­i­tor­ing be­cause of their large trade sur­pluses with the U.S. and has sparked a trade bat­tle with Canada, another G-7 coun­try, by im­pos­ing higher tar­iffs on im­ports of Cana­dian soft­wood lum­ber.

Fluc­tu­a­tions in cur­rency val­ues can have a big ef­fect on trade flows, so any mea­sures a coun­try takes to lower its ex­change rate is of­ten dimly viewed by trade part­ners on the re­ceiv­ing end. Coun­tries in the G-7 have com­mit­ted in the past to avoid ex­plic­itly try­ing to weaken their own currencies.

Euro mem­ber and top ex­porter Ger­many has ben­e­fited from a drop in the euro against the dol­lar but has lit­tle in­flu­ence over the ex­change rate since it shares it with 18 other coun­tries.

“I think the sec­re­tary has made clear to his coun­ter­parts that it is very im­por­tant for all coun­tries to abide by their ex­change rate com­mit­ments that they have made ... I think that mes­sage is com­ing through loud and clear,” the se­nior Trea­sury of­fi­cial told re­porters in a brief­ing on the up­com­ing talks. The of­fi­cial spoke un­der ground rules that pre­vented use of his name.

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