While High In Minds At G7 Finance Meeting, Protectionism Is Off The Agenda

A better picture of U.S. President Donald Trump’s direction on key policies that he has yet to spell out is hoped to be obtained by Europe, Japan and Canada in a G7 meeting in Italy this week.

Inequality, international tax rules, cyber security and blocking the funding of terrorism would be the focus of the official agenda for Group of Seven finance ministers and central bankers in the city of Bari from Thursday to Saturday.

However, to gauge U.S. intentions on issues where Trump has threatened to upset the group’s consensus: protectionism and climate change, many participants will be looking to Treasury Secretary Steven Mnuchin.

“It will be another chance to learn what the U.S. government is thinking and planning,” said a G7 official at one of several briefings by national delegations this week.

Ministers dropped their traditional pledge to keep global free trade open, acquiescing to an increasingly protectionist United States at a meeting of the larger Group of 20 financial chiefs in Germany in March.

The White House has said that after meeting leaders at a G7 summit on May 26-27, Trump will decide whether to quit the global Paris agreement on climate change – a campaign promise.

“The important thing is that Mnuchin will be there, with a clearer picture of U.S. policies than was available in previous weeks and months,” said another G7 official who also asked not to be named.

Italian Treasury officials said that there will be no formal discussion of trade in Bari, which reflects tensions over Trump’s attitude to protectionism. The subject will be tackled at the summit, in Taormina, Sicily, at the end of May.

“Everyone is concerned about the U.S. attitude towards protectionism,” said the second G7 official, who called Trump’s focus on bilateral trade surpluses or deficits a “poisonous” notion of what fair trade policy should entail.

As March’s G20 did, by allaying fears that the new U.S. administration might weaken the G20’s united front on global currency policy, the closing statement from Bari will reiterate a warning against competitive devaluations, Italian officials said.

Ahead of a May 22 meeting of euro zone finance ministers on the disbursement of new loans for Athens, there will also be discussion of debt relief for Greece while not on the official agenda, sources said.

G7 ministers will promise to seek more effective ways to tackle money laundering, international tax evasion and financing of terrorism and on taxation, they will sign the Bari Declaration for Fighting Tax Crimes and Other Illicit Financial Flows.

Italy would “do everything we can” to push for more effective international rules on the taxation of global internet companies, Italian Economy Minister Pier Carlo Padoan said last week. But he admitted that the progess is liekely to be hindered by “different positions within the G7” on the issue.

Italy was keen to make “inclusive growth” the main focus of the meeting as it has seen a sharp rise in poverty and income inequality over the last decade and it is one of the world’s most sluggish economies.

However, officials said that the “Bari Policy Agenda” to be signed there will suggest approaches for countries to tackle inequality depending on their circumstances but will not commit to specific measures.

(Adapted from Reuters)

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