The two-day meeting of the finance ministers and central bank governors of the 20 biggest economies in the German town of Baden-Baden ended with no agreement on resisting protectionism and for supporting free trade.
Financial leaders dropped a pledge to keep global trade free and open, acquiescing to an increasingly protectionist United States after the two-day meeting failed to yield a compromise.
Instead, they only made a token reference to trade in their main communique by saying the G20 would work together to strengthen the contribution of trade to their economies.
This could prove a solid setback in the G20 process and poses a risk for growth of export-driven economies such as host Germany.
Many regions globally are showing economic growth but it’s weaker than the members of the G20 group had expected, Russian central bank governor Elvira Nabiullina said today, after the meeting ended.
To address the issue of weak economic growth, efforts in monetary and fiscal policy, as well as in the policy of structural reforms are needed, Nabiullina said in emailed comments.
She added that capital flow volatility has become “a challenge for many”.
“Cooperation on the international level could help to solve the problem of sources of sharp capital flow volatility and its consequences,” Nabiullina said.
Private consumption and state spending have become the main growth drivers of Europe’s biggest economy, Germany, but exports still account for roughly 45 % of its gross domestic product.
The Association of German Chambers of Commerce and Industry (DIHK) said the token reference to trade was a serious setback for the multilateral trade order.
German Vice Chancellor Sigmar Gabriel has suggested that the European Union should refocus its economic policy toward Asia, should the Trump administration pursue protectionism.
German Finance Minister Wolfgang Schaeuble tried to play down the lack of a clear rejection of protectionism on Saturday, saying some delegations did not have a mandate to support far reaching commitments on commerce.
U.S. President Donald Trump has already pulled out of a key trade agreement and proposed a new tax on imports, arguing that certain trade relationships need to be reworked to make them fairer for U.S. workers.
Germany managed to rescue some of the previously common G20 language supporting free trade and open markets in a separate document adopted by policymakers in Baden-Baden.
The list of principles summarizes reform recommendations for governments to boost the resilience of their economies against future shocks, including the advice to strengthen policy frameworks to reap the benefits of open markets.