FUKUOKA, Japan:Global trade tensions threaten an expected pick-up in economic growth this yearand in 2020, a draft communique by the world's financial leaders showedyesterday, but the policymakers were divided on whether the need to resolvethem was "pressing". Finance ministers and central bank governors ofthe world's 20 biggest economies, the G20, are meeting in the southern Japanesecity of Fukuoka to discuss the global economy amid rising trade tensionsbetween China and the United States.
"Globalgrowth appears to be stabilizing and is generally projected to pick upmoderately later this year and into 2020," the draft G20 communique, seenby Reuters, said. "However ... risks remain tilted to the downside. Theseinclude, in particular, intensified trade and geo-political tensions,"said the draft communique, which may yet change before it is released today.
The draftstatement, to which all the G20 financial leaders have to agree, contains a sentencein square brackets-which means it was not yet agreed-that trade and investmentwere important engines of growth. "We reaffirm our leaders' conclusions ontrade from the Buenos Aires Summit and recognize the pressing need to resolvetrade tensions," the sentence still under discussion said.
If the sentenceis dropped from the final statement, it would mean rowing back on an agreementreached by G20 leaders last year in Argentina that while the existinginternational trade system-the World Trade Organization-needs improvement, ithelps world growth and should be fixed. G20 leaders also agreed last Decemberto review the WTO reform in Osaka later this month.
But progress inoverhauling the WTO, which still functions under rules created a quarter of acentury ago, has been slow, partly because of US actions to block appellatejudge appointments. A Japanese finance ministry official who attendedyesterday's G20 session told reporters that most of the group's members voicedconcern that escalating trade tensions posed a huge downside risk for theglobal economy.
"With somany countries expressing concern over the fallout (from the trade tensions),there seems to be some momentum to reflect that in the communique. But there'sno conclusion yet" on the language of trade, the official told reporters.Relations between the United States and China have deteriorated since USPresident Donald Trump in early May accused Beijing of reneging on commitmentsto change its ways of doing business with the rest of the world. Washingtonraised tariffs on Chinese goods and threatened new levies, while Beijing hasretaliated.
'Great outcome'
US TreasurySecretary Steven Mnuchin, who will hold talks with China's Yi Gang on thesidelines of the G20 gathering, said the United States wants free, fair andbalanced trade with China, in part to close a gaping US trade deficit withChina.
But the UnitedStates is prepared to levy tariffs on virtually all remaining Chinese importsif the "right deal" cannot be reached to satisfy US demands forbetter Chinese protections of intellectual property and curbs to technologytransfers and state subsidies, Mnuchin said. "If we can't have that, theend result will be that my expectation is that many companies will move theirproduction out of China to other locations," due to tariffs, Mnuchin said.
The treasurysecretary said he did not believe that the current trade tensions were harmingthe global economy, one of the key topics being discussed by G20 officials inFukuoka. "So I don't think in anyway that the slowdown you are seeing in parts of the world are the result oftrade tensions at the moment," he said.
Nevertheless, ifa deal were found, it would be a boon to the global economy as a whole, hepredicted. "People talk about the economic risk of trade wars... peopleshould be even more focused on the benefits of having a great trade agreementand how that creates economic opportunities in both economies, especially for agrowing middle-class in China," he said. The potential economic benefitsfor China were "part of the reason I don't understand why they wentbackwards because I think this could be a great outcome for them".
He said hisscheduled meeting with People's Bank of China Governor Yi Gang will not be a"negotiating meeting" on trade issues, reinforcing the view therewill be little breakthrough in the row between the world's two largesteconomies.
He added that anymajor progress will rest with Trump's expected meeting with Chinese PresidentXi Jinping at a G20 leaders' summit late this month. In a rare positivedevelopment, the US administration said it will put off imposing tariffsagainst Mexico after the two countries reached a deal to contain the migrationof immigrants crossing the southern US border. "It's a very good outcomenot just for the United States and Mexico, but for the global economy,"Bank of Japan Governor Haruhiko Kuroda told reporters. - Agencies