"The bar is very low," a member of the German delegation is quoted as saying in an article in the Financial Times about the G-20 finance ministers meeting currently taking place in Germany. His statement is not surprising considering that the meeting is occurring in unprecedented times.
The group, which was formed in 1999 to promote globalization, finds itself at an odd juncture in its history. The global ascendancy of far-right politics has brought economic protectionism to the fore and put globalization in retreat. The German delegation member quoted in the FT piece further says that "open dialogue" between members would be a sign of success. That statement is not surprising when you consider that several G-20 member countries, such as France, are contending with forces of economic protectionism at home. (See also: Warren Buffet Attacks Trump's Protectionism.)
Observers will especially note U.S. Secretary of Treasury Steven Mnuchin's interactions with his counterparts. His aim is clear – to tone down his boss' rhetoric. Immediately after his election, President Donald Trump ratcheted up talk against globalization by threatening to tax imports from overseas. That tax, known as a border adjustment tax, could seriously affect the United States' trade relationship with the rest of the world. For example, Germany, which is hosting the meeting, has a significant trade surplus with the U.S. (See also: US Exporters in Favor of Border Adjustment Tax.)
An import tax will negatively affect the manufacture and import of German cars in the U.S. Imports from China, the biggest U.S. trading partner, will be similarly affected. Another topic on the agenda is a strong U.S. dollar. Trump has accused China of being a currency manipulator,pushing for a weakening of the dollar. But that might be difficult considering that the greenback hit an 11-month peak right after Trump's election. The end result has been that U.S. exports are less competitive compared with those of its trading partners. (See also: How the Fed Rate Hike Affect the US Dollar.)
The signals coming out of Baden Baden, where the conference is being held, are mixed. Mnuchin has struck a conciliatory tone. "It is not our desire to get into trade wars, where there is an imbalance in trade relations," he said after meeting Germany's finance minister Dr. Wolfgang Schauble on Thursday. In the past, Mnuchin has come out in favor of applying the border adjustment tax selectively to companies that have outsourced a majority of their manufacturing operations abroad. However, Trump's economic platform has promised 4% growth, a figure that is only possible by spurring increased domestic investment. For his part, Schauble said the grouping might exclude mention of trade in its final statement.
In a paradox of sorts, China, which has emerged as a top three trading partner to several countries in the G-20 bloc, seems to be the most vociferous proponent of free trade within the grouping. According to reports, it is pressing for a strong statement on free trade. However, it might be a while before that statement is issued as the West contends with the rise of economic protectionism forces. A probable denouement would be that the finance ministers kick the can down the road to the G-20 leaders meeting, which occurs in July this year. (See also: US-China Trade War May Hurt US Companies Most.)