The Group of 20 (G-20) major economies has sent a message that rising protectionism across the developed countries poses a threat to flourishing of the global economy. The United States has, however, cast its doubts over its adherence to that stance. US Treasury Secretary Steven Mnuchin reiterated the Trump administration's emphasis on defending America against what it sees as unfair trade practices, and called on the International Monetary Fund (IMF) to do more in its watchdog role. His comments came just hours after a meeting of G-20 finance ministers in Washington which saw Germany's finance minister Wolfgang Schaeuble saying that there was 'broad agreement' that 'free trade is better for global growth'. The German minister, whose country holds the rotating G-20 presidency, said that there was a 'broad consensus' that 'protectionism would be damaging to the global economy and the concerned economies as well'.
Since the last finance ministers' meeting in Germany a month back in March 2017, Schaeuble's statement this time seemed to mark a striking change of tone. The United States prevented the G-20 from including a traditional pledge against protectionism in its final communique, calling the language 'irrelevant.' However, it was unclear as to how far the renewed 'consensus' was extended among the countries concerned. This time the group did not release a communique and Mnuchin's statement appeared to weaken Schaeuble's declaration of unity of global major economies. At the normally placid and formulaic gathering of the G-20 finance ministers, rising protectionist and anti-globalisation sentiments in key global economies have created a tense atmosphere, where the G-20 officials met ahead of a semi-annual meeting on April 22, 2017 of the International Monetary Fund.
Concerns have been fuelled by (i) President Donald Trump's threats to impose tariffs on countries that have trade surpluses with the United States, (ii) the British decision to leave the European Union, and (iii) by the anti-internationalist rhetoric by some candidates in the 2017 French presidential election campaign. Mnuchin said in a short but tough statement that the United States 'will continue to promote an expansion of trade with those partners committed to market-based competition, while more rigorously defending ourselves against unfair trade practices'. Trump's officials have directed some of their most aggressive language at Germany and China. Mnuchin said that 'excessively large trade surpluses are not conducive to supporting a free and fair trading system' around the world.
Mnuchin said that countries with large external trade surpluses and sound public finances have a particular responsibility for contributing to a more robust global economy by deploying fiscal policy aggressively to boost growth and help facilitate global rebalancing. He, however, said that the IMF should to do more to monitor these countries and 'identify specific policy adjustments' they should implement on their own. The IMF has flagged rising protectionism and possible trade wars just when the global economy is finally gaining momentum after the 2008 financial crisis as a threat to the global economic recovery. And German central bank chief Jens Weidmann said that the G-20 finance ministers this year underlined the negative growth effects of raising barriers to trade. He said that almost everybody in the meeting underscored the importance of an open market and free market access.
Schaeuble said the G-20 ministers also agreed that economic growth must be made 'more inclusive' in order to stem the rise of protectionism across the world. He said many people around the world feel that they do not benefit from the advantage of growth and globalisation, and they need to tackle this. Otherwise they will see more protectionism and countries retreating from globalisation down the road. Officials agreed on the 'need to do more' to spread the benefits of growth and globalisation, which includes investments in education, social development and infrastructure. That echoes the repeated urgings of IMF Managing Director Christine Lagarde made a call to wealthy countries to help those left behind by global prosperity.
On the issue of financial regulation, Weidmann said that there was consensus about continuing reforms agreed previously and there were few fears about the risk of seeing erosion of the regulations implemented in the wake of the 2008 global financial crisis. He said the 'debate about the regulatory race to the bottom has disappeared' from G-20 discussions. But there too, the US actions contrasted with that statement as Trump on April 21, 2017 signed an order directing Mnuchin to review the US financial regulations known as Dodd-Frank that were erected in the wake of the crisis.
Mnuchin said a significant amount of time has passed since the 2008 global financial crisis. "With the passage of time and with Trump's leadership, the US is now well-positioned to evaluate what works and what doesn't. Where we can do so, we will lift the burden of excessive regulation to make sure that banks can lend, small businesses can borrow, and American workers can thrive," he added. But with the rise of protectionism, the less developed countries like Bangladesh will be harmed as they are less competitive in the world market compared to the high-tech developed countries. The less developed countries like Bangladesh need special advantages in the world market to survive.
The writer is a retired Professor of Economics, BCS General Education Cadre.
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