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G20 drops vow to resist all forms of protectionism

Finance ministers from the world’s biggest economies have dropped pledges to renounce protectionism in a meeting marked by tension over trade between the US and China.

G20 finance ministers meeting in the German resort town of Baden-Baden noted the importance of trade to the global economy, but dropped tougher language from last year that vowed to “resist all forms of protectionism”.

We have reached an impasse

The new communique said: “We are working to strengthen the contribution of trade to our economies. We will strive to reduce excessive global imbalances, promote greater inclusiveness and fairness and reduce inequality in our pursuit of economic growth.”

The watered-down commitments on free trade reflected the anti-globalisation mood that Donald Trump has brought to Washington and came in the first G20 meetings between Steven Mnuchin, the new US Treasury Secretary, and his foreign counterparts.

While representatives from China were particularly vocal in urging forthright language on protectionism, the US was unwilling to comply, in a turnround from America’s traditional position as a standard-bearer for globalised capitalism.

Japan was said to be one of the few countries that struck a more supportive tone towards the US approach.

Wolfgang Schäuble, Germany’s finance minister, said: “It will take some time for the US finance ministry to come forward. It may be sensitive for some, for others less so. We really tried on all levels.

“We have reached an impasse,” he said. “That’s why at the end we said nothing on [avoiding protectionism], because it meant different things when we said we didn’t want protectionism.”

The mood from the US towards the G20 has shifted dramatically since the arrival of Mr Trump, whose America First economic strategy clashes with traditional promises that G20 leaders have willingly signed up to in the past. It heralds a harsher approach in US relations with its counterparts — as evidenced this week by the tense meeting between Mr Trump and Angela Merkel, the German chancellor, on Friday.

The haggling over the trade language went late into the meeting, underscoring strong feelings on both sides of the debate.

As late as noon on Saturday, there was speculation that the statement would make no mention of trade at all. The compromise was proposed by the Canadian delegation and backed by the presidency, held by the German delegation. Britain and other European delegations had sought strong language committing to a rules-based multilateral trading system.

However, several delegations wanted to avoid forcing the US Treasury into a corner so soon after Mr Mnuchin had taken office.

Via FT