G20 Finance Ministers Call for Continued Dialogue on Trade as US Prepares Metal Tariffs
This week, finance ministers and central bank governors from the world’s 20 major advanced and emerging economies meeting in Buenos Aires sought to find common ground on trade and called for “further dialogue and actions” on the subject.
The ministerial-level meeting, the first of the Argentine G20 presidency, found officials eager to affirm the importance of international trade and cooperation and grappling with how to address trade tensions as the US prepares to implement tariffs on aluminium and steel imports on national security grounds.
The US tariffs of 25 percent on steel imports and 10 percent on aluminium are due to take effect on Friday 23 March. (See Bridges Weekly, 8 March 2018)
Other key G20 items for discussion focused on inclusive growth, examining two of Argentina’s three priorities for the 2018 agenda: the future of work and infrastructure for development. Longstanding G20 agenda items were broached, such as the international financial architecture, the global tax system, and financial regulation, as well as newer topics such as cryptocurrencies.
“It is necessary for the G20 to put the needs of people first, with a focus on equality and sustainability,” said Argentine President Mauricio Macri at the close of the meeting, adding that his hope was to inject “a perspective from the global south to the G20 presidency.”
Macri called on officials to demonstrate the relevance of the G20 as an “efficient mechanism to address the global challenges of the 21st century.”
The two-day meeting drew over 400 delegates from G20 countries and international organisations. The group will next meet at the sidelines of the Spring Meetings of the International Monetary Fund (IMF) and the World Bank on 20 April. In parallel, the G20’s Trade and Investment Working Group (TIWG) will be hosted in Argentina for the first time from 7-8 May.
In support of international trade
The final communiqué includes a couple of lines on trade and investment, largely referring back to last year’s leaders’ statement from their summit in Hamburg, Germany. (See Bridges Weekly, 23 March 2017)
The communiqué released this week in Buenos Aires also calls international trade and investment “important engines of growth, productivity, innovation, job creation, and development,” and repeats language from last year on “working to strengthen the contribution of trade to our economies.
“It is a clear and decisive message on the benefits of international trade,” Argentine Treasury Minister Nicolás Dujovne said of this week’s communiqué in a press conference on Tuesday, underscoring the need for continued dialogues to build consensus.
The communiqué also surveys the brighter global economic outlook and notes a “pick-up in investment and trade” since the previous meeting last October, adding that many challenges still remain, including “heightened economic and geopolitical tensions.”
“This is our moment to take action to address structural growth impediments, rebuild buffers, reduce excessive global imbalances, and mitigate risks,” read the statement.
Trump tariff fall-out
With steel and aluminium tariffs due to take effect this week, questions loom around product exclusions, as well as the countries that will be implicated. Washington has adopted a case-by-case approach to exemptions. Several countries and country groups, including Argentina, Australia, Brazil, the EU, Japan, and South Korea, have approached the US for an exemption. (See Bridges Weekly, 15 March 2018)
Canada and Mexico have already been granted exemptions, pursuant to ongoing talks for upgrading the North American Free Trade Agreement (NAFTA), among other factors. (See Bridges Weekly, 8 March 2018)
The response elicited from trading partners will be decisive in averting or fuelling a series of responsive measures. The EU has already catalogued those US products it plans to target should it not be exempted from US tariffs, including cigarettes, sweetcorn, lipstick, sailboats, citrus products, motorcycles, Kentucky bourbon, and blue jeans. The sum total of US exports hit could run up to €6.4 billion (US$7.9 billion).
“The first risk is the risk of inward looking policies and protectionism,” Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, said on Monday, according to comments reported by Reuters. “A trade war would be stupid. There would be damage on both sides of the Atlantic.”
US officials have defended the measures as necessary to protect American workers and shore up domestic industries so they can meet national security needs.
China, as the top global producer of steel, has been at the centre of concerns over steel overproduction and alleged dumping, resulting in factory shut-downs and job losses in other markets on a global scale. Beijing has noted that it is working to address the issue domestically, while also stressing that the overcapacity issue is a global problem.
Topics for inclusive growth
Officials also discussed two priority areas identified by the Argentine presidency in terms of their potential contributions to inclusive growth. Deliberations considered the future of work in view of widespread technological change upending traditional work structures, and a role for the G20 in finding ways to harness the opportunities for growth, job creation, productivity, economic equality, and quality of life.
Any potential policy response would also need to address the associated challenges, identified in the communiqué as changes to labour markets, growing importance of skills and adaptability, and the risk of increased inequality within and between countries. Concretely, members agreed to develop a menu of policy options for consideration when finance ministers and central bank governors reconvene in Buenos Aires from 21-22 July.
“We want to ensure that adopting technological advances does not lead to economic exclusion or other negative side effects,” President Macri said in December 2017, explaining the Argentine vision for the G20 during its presidency.
“We must ensure that any new wave of technological advances is as inclusive as possible, and this requires considerable investment in training so that citizens have the skills they need for work and life. We need to forge the opportunities and skills which prepare our people for this transformation, starting now,” he said.
Cryptocurrencies were also up for debate this week, as ministers weighed both their possible contribution to financial inclusion, along with potential associated risks such as funding illegal activities.
“We acknowledge that technological innovation, including that underlying crypto-assets, has the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly,” the communiqué affirmed.
The second priority, infrastructure for development, aims at closing a US$5.5 trillion infrastructure gap projected from now up to 2035 to promote inclusive growth. “Infrastructure is critical to boost productivity, enhance connectivity, sustain long-term inclusive growth and provide our citizens with physical and digital access to the new economy,” explains the communiqué.
ICTSD reporting; “Steven Mnuchin rejects accusations of US protectionism,” FINANCIAL TIMES, 20 March 2018; “World Economic Leaders Warn of Trade War as Mnuchin Defends Policies,” NEW YORK TIMES, 20 March 2018; “Europe reveals long list of US exports it could hit,” CNNMONEY, 16 March 2018; “Protectionism could harm G20 economic growth, must be avoided: EU,” REUTERS, 19 March 2018; “Japan says G20 communique to reflect fears of protectionism, gap remains,” REUTERS, 20 March 2018; “G20 pushes for free trade as U.S. vows to defend national interest,” REUTERS, 19 March 2018; “Trade fights loom over G20 meeting in Argentina,” CNNMONEY, 18 March 2018.