US breaks with allies at G20 over trade rules

US breaks with allies at G20 over trade rules
Mr Steven Mnuchin, attending his first major international gathering as US Secretary of Treasury, declared that current trade rules were unfair to the US and signalled that it would review trade agreements to seek better deals for Washington. Photo: AP
Members unsettled over US’ bid to follow on Trump’s ‘America first’ vows and review of deals
Published: 4:00 AM, March 20, 2017

BADEN-BADEN (GERMANY) — The United States broke with other large industrial nations over trade during the weekend as the Trump administration rejected concerns among allies about spreading protectionism and made clear that it would seek new approaches to managing global commerce.

At a meeting of finance ministers and central bankers from the Group of Twenty (G20) industrialised and emerging nations and the European Union, Mr Steven Mnuchin, attending his first major international gathering as US Secretary of Treasury, signalled that US policy would follow the campaign promises made by President Donald Trump to put “America first” and review trade agreements to seek better deals for Washington.

As a result, the ministers’ joint statement, normally a study in blandness, became an unlikely focus of controversy. The representatives could agree only on a compromise stating, in effect, that trade is a good thing. Adjectives such as “open” were dropped, and the ministers omitted language used in previous communiques that condemned protectionism, repudiating decades of free trade doctrine.

For Asian and European officials, many of them meeting their Trump administration counterparts for the first time, it was a startling lesson in how Mr Trump and his team are overturning long-held assumptions about international commerce.

Mr Mnuchin led off the ministers’ meeting last Friday with a declaration that current trade rules were unfair to the US, positioning the administration against virtually all the other participants, according to an official who attended the closed session and spoke on the condition of anonymity because of the sensitivity of the talks.

“We thought that it was very important for the communique to reflect what we discussed here,” said Mr Mnuchin at a news conference on Saturday. “The historical language was not relevant.”

At the insistence of the US, the communique also dropped a pledge to observe the Paris accords on climate change. Mr Mnuchin deflected questions on the issue, saying it was outside his purview.

The US government’s lack of reverence for existing norms and treaties is particularly unsettling to the Europeans, who are coping with weak economic growth and a surge in populism. The last thing they need is a disruption in commerce with their biggest trading partner.

Some complained privately that the US delegation rode into this stately spa and casino town, where Romans once bathed in the mineral-rich waters, determined to shake up the existing order but without any clear idea of what should replace it.

The disagreement over trade principles was a sharp contrast to the statement issued when the central bankers and finance ministers met last July in Chengdu, China. “We underscore the role of open trade policies,” the leaders had said in the Chengdu communique, which used the word “trade” six times. They promised to “resist all forms of protectionism”. Less than a year ago, such a statement was not questioned. Business leaders on both sides of the Atlantic still hoped for a trade pact between the US and the EU that would eliminate already low tariffs and harmonise regulations governing things such as vehicle headlights.

Since then, Mr Trump has pulled out of the Trans-Pacific Partnership negotiated by former president Barack Obama, vowed to renegotiate the North American Free Trade Agreement with Mexico and Canada, and criticised the German carmaker BMW for building a factory in Mexico.

The best that the G20 participants could come up with on Saturday was: “We are working to strengthen the contribution of trade to our economies.”

The communiques issued at the end of G20 summit meetings are meant to show that nations such as Brazil, China, France and Japan can put aside competing interests and reach consensus, however vague, on major issues. The statements emerge from tortuous deliberations and are the opposite of impulsive.

For many European and Asian officials, meeting in the Belle Epoque spa building with polished marble floors and chandeliers dangling from the ceiling, it was their first encounter with the Trump administration and its “America first” foreign policy.

Some viewed the meetings as a chance to socialise with the new US representatives and to try to absorb them into the international order.

Mr Angel Gurria, the secretary-general of the Organisation for Economic Cooperation and Development and a participant in the meetings, said the chance to get to know Mr Mnuchin was more important than any joint statement. “We want to make him feel comfortable; we want to make him feel at home,” Mr Gurria told reporters. “These meetings are not about the communique.”

Mr Trump’s threats to impose punitive taxes on imported goods are a particular worry for Germany, whose economy is built around exports of automobiles and industrial machinery. The US is the biggest purchaser of German goods, buying €107 billion (S$161.2 billion) worth last year. Germany imported goods from the US worth €58 billion.

The trade imbalance has made Germany a target for Trump administration officials, who have accused Germany of manipulating the value of the euro and have said they want to renegotiate trade terms directly with Berlin, even though that task is done at a European level by Brussels.

“We are going to look to our counterparts to continue to trade, but to look to have more balanced trade,” said Mr Mnuchin. “That means over time reducing our trade deficits. I think we can do that in a way that’s good for the American worker, that’s good for our companies and that’s good for our counterparts.” THE NEW YORK TIMES