BADEN-BADEN, Germany Finance chiefs from the Group of 20 nations reaffirmed exchange rate commitments and vows to "refrain from competitive devaluations" at their mid-March meeting in Baden-Baden, Germany. Under pressure from the U.S., however, representatives removed from their joint statement the phrase to "resist all forms of protectionism," which appeared in last year's communique. Also dropped at the behest of U.S. President Donald Trump's administration was a pledge to fund the fight against climate change.
"The historical language was not relevant," U.S. Treasury Secretary Steven Mnuchin told journalists in his first appearance at an international forum after the meeting on March 18.
At working-level talks prior to the G-20 meeting, U.S. officials had insisted that anti-protectionist pledges cited in past statements be omitted from the communique and instead sought to include language backing "free and fair trade."
Trump's protectionist stance, which runs contrary to the G-20's free trade commitments, is in line with his promise to reduce trade deficits and create jobs, two priorities of his core constituency, which is composed largely of factory workers in the Midwest.
According to sources, Japan and the European Union took a wait-and-see approach to Trump's adamant rejection of anti-protectionist language. But China, which accounts for nearly half of the U.S. trade deficit, opposed Washington, saying it is not clear what the U.S. means by "fair trade." Beijing suspected that "fair" means a reduction in its trade surplus with the U.S.
Germany, which chaired this year's meeting, mediated a conciliatory, if not banal, statement that said, "We are working to strengthen the contribution of trade to our economies." According to reports, German Finance Minister Wolfgang Schaeuble acknowledged that trade talks were complicated, while other European finance chiefs expressed regret that they were unable to reach a satisfying conclusion.
Meanwhile, the U.S. showed flexibility on G-20 exchange rate commitments. Trump has repeatedly stressed that the U.S. dollar is "too strong," making it nearly impossible for American companies to compete with overseas industries. The U.S. hoped the G-20 would highlight concerns over currency devaluations, but any wording to this effect would acknowledge that some countries are actually manipulating their currencies to gain a competitive edge.
Trump had previously lambasted Japan and China for devaluing their currencies to make exports cheaper. Peter Navarro, head of the administration's new National Trade Council, also criticized Germany for exploiting the undervalued euro. The U.S. argued that the G-20 statement express "concerns [over competitive devaluations]." But this was opposed by Japan, China, and Germany, all of which felt that the wording directly targeted them.
In Germany, Mnuchin reiterated that "the strengthening of the dollar is a good thing" over the long term. As a result, the latest joint statement largely repeated the previous stance on exchange rates. Japanese Finance Minister Taro Aso met with his U.S. counterpart on the sidelines to discuss foreign exchange policy. After the bilateral talks, Aso praised Mnuchin, saying that he has a good understanding of practical matters.