G20 SHOWDOWN

U.S. Torpedoes G20 Free Trade Statement on German Home Turf

  • Why it matters

    Why it matters

    The Trump administration’s refusal to endorse free trade at the G20 finance ministers meeting in Baden-Baden signals a departure by the United States from basic international norms.

  • Facts

    Facts

    • For the past decade, the G20 finance ministers have issued a statement endorsing free trade after their meeting.
    • U.S. Treasury Secretary Steve Mnuchin torpedoed a statement in which the G20 members would have vowed to oppose all forms of protectionism.
    • Nearly all the other G20 members opposed the U.S. move. Only Saudi Arabia stayed out of the fight.
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  • Audio

    Audio

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U.S. Treasury Secretary Steve Mnuchin addresses a news conference at the G20 Finance Ministers and Central Bank Governors Meeting in Baden-Baden
U.S. Treasury Secretary Steve Mnuchin addresses a news conference at the G20 finance ministers meeting in Germany. Source: Reuters.

Chancellor Angela Merkel probably never anticipated that the greatest challenge to Germany’s G20 leadership would be the United States. Then again, few people expected Donald Trump to win the U.S. presidency.

Mr. Trump, who made a protectionist economic agenda part of his platform, has made no secret of how he feels about Germany’s trade surplus. His trade advisor, Peter Navarro, has gone so far as to accuse Berlin of using an undervalued euro to exploit the United States.

Given the escalating tensions between the two largest Western economies, all eyes were on Ms. Merkel and Mr. Trump as they met for the first time in Washington on Friday.

The chancellor, with executives such as Joe Kaeser of Siemens and Harald Krüger of BMW in tow, sought to demonstrate that German companies are job creators in the United States and trade is not a zero-sum game.

As Ms. Merkel was in Washington trying to convince Mr. Trump of the virtues of free trade, U.S. Treasury Secretary Steven Mnuchin was in Baden-Baden battling G20 finance ministers over a joint communique.

Virtually all the other representatives – from France and Brazil to Singapore – protested the removal of the language on free trade.

For the past decade, the G20 finance ministers have issued a joint statement endorsing free trade. Normally, it’s an uncontroversial reaffirmation of the group’s basic principles. But with Mr. Trump in the White House, the international consensus on trade has been upended.

Despite opposition of the E.U. member states, China and Russia, Mr. Mnuchin torpedoed a statement in which the G20 would have vowed to oppose “all forms of protectionism.”

The U.S. side also refused to back language that endorsed a “multilateral” and “rules-based” trade system, which likely sounded too much like the World Trade Organization. The Trump administration has suggested that it won’t be bound by WTO rulings if it believes they violate U.S. sovereignty.

Mediators in Baden-Baden introduced a language of compromise that endorsed “international” and “fair” trade. Though the Mr. Mnuchin agreed to back the language, other G20 countries expressed opposition. Fair trade sounded too much like Mr. Trump’s campaign rhetoric.

Virtually all the other representatives – from France and Brazil to Singapore – protested the removal of the language on free trade. Chinese Finance Minister Xiao Jie said his colleagues in Baden-Baden weren’t entitled to roll back agreements made by the G20 heads of state and government last year at the summit in Hangzhou. Only Saudi Arabia stayed out of the fight with the United States.

Read our in-depth coverage of Germany’s G20 presidency.

In the end, the finance ministers issued a watered-down statement in which they agreed “to strengthen the contribution of trade to their economies.” German Finance Minister Wolfgang Schäuble was frank in his assessment of the outcome.

“We have agreed on a formulation which, in terms of the substance, doesn’t really lead us forward,” Mr. Schäuble said.

The failure of the G20 to endorse free trade is a defeat for Germany, which has sought to promote a liberal agenda as the group’s leader this year. But the Trump administration’s victory in Baden-Baden will not be the last word on the subject.

Ms. Merkel will have another opportunity try and convince Mr. Trump to back free trade at the G20 summit of heads of state and government in Hamburg in July. Events in Washington and Baden-Baden, however, make clear that she faces an uphill battle.

 

Martin Greive is a correspondent for Handelsblatt based in Berlin. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. To contact the authors : hildebrand@handelsblatt.comgreive@handelsblatt.com

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