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Trade tensions overshadow G20 finance ministers meeting

, March 19, 2018, 0 Comments

#MakeAmericaGreatAgain-China-marketexpress-inThe two-day gathering in Argentina comes at a tense moment, just a few days before the US will impose higher tariffs on steel and aluminum imports and new US trade measures reportedly targeted at China.

Worries about the potential for a US-China trade war and frustration over President Donald Trump’s steel and aluminum tariffs will dominate the G20 finance ministers’ meeting in Buenos Aires, starting on Monday and also including the countries’ central bank heads.

It comes just two days before Washington will slap import duties on steel and aluminum of 25 percent and 10 percent respectively, with a number of countries scrambling for last-minute exemptions.

Edwin Truman, a former Treasury and Federal Reserve international policy official now with the Peterson Institute for International Economics believes US Treasury Secretary Steven Mnuchin will get “an earful” of pleas urging to be left out.

“Mnuchin is going to be playing defense in his comments and he’ll put the best face on it that he can,” Truman told the news agency Reuters.

As US President Donald Trump appears determined to follow through on his campaign pledge to dismantle “unfair” trade relations based on World Trade Organization (WTO) rules, the finance ministers are likewise set to take on the Trump administration, said a source close to the negotiations. “The situation is such today that they will not be able to not speak about it. The question is how far we can go,” the source told the news agency AFP.

Chinese rumblings

However, the US treasury secretary is also expected to use the meeting to win consensus on how to combat China’s trade practices. Apart from higher tariffs on global steel producers, Washington is reportedly also weighing broader anti-China tariffs and investment restrictions as part of a US intellectual property probe launched last year.

US plans to impose punitive tariffs worth $60 billion on Chinese products from the IT, telecoms and consumer products sectors, have raised worries that retaliation from Beijing could unleash a tit-for-tat trade war choking off global trade and growth.

Already Beijing has warned that there will be “no winner” in a trade war between the world’s two largest economies. “[A trade war] can only harm others and hurt oneself,” Chinese Foreign

Ministry spokesman Lu Kang said Friday. “I believe there is no doubt about this, and we should not take any chances.”

 Obsolete agenda

The looming trade war is likely to eclipse other burning issues on the G20 agenda, including the taxation of the world’s tech giants. The “tax optimization” practices of the likes of Google, Amazon, Facebook and Apple are regularly a source of friction between the US and its allies.

But while G20 members Britain, France, Germany and Italy are pushing for a revenue-based tax on the US tech giants, Washington has said it “firmly opposes” any new tax on big tech.

The EU unveiled a proposal last week that would tax technology companies somewhere between two percent and five percent, based on overall revenue in the EU and not just on profits.

During the meeting, the ministers were also expected to discuss greater regulatory oversight of so-called cryptocurrencies, which some see as necessary given the huge fluctuations in the value of bitcoin and other digital currencies in recent months.

Communication differences

Despite major differences over global trade, the draft of the final communique doesn’t mention the word protectionism. Instead, it includes a warning to countries not to “retreat to inward looking policies.”

But several G20 officials, including the finance ministers from host country Argentina and Germany, said they would insist on maintaining G20 communique language emphasizing “the crucial role of the rules-based international trading system.”

“We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements,” reads the phrase they want so see included. But it’s unclear whether that language will stand.

At the first G20 meeting in Germany about a year ago, US Treasury Secretary Steven Mnuchin pressed the group to drop a decades-old pledge “to resist all forms of protectionism.” This was replaced with a watered-down pledge to “strengthen the contribution of trade to our economies.”