BADEN-BADEN, Germany —
Group of 20 financial chiefs apparently succumbed to the clout of the new U.S. administration of President Donald Trump and dropped their long-held pledge to resist protectionism in their communique released after their two-day gathering through Saturday.
Sources from the G-20 countries downplayed the significance of the disappearance of the phrase resisting “all forms of protectionism,” but some observers say the relevance of the group designed to promote international economic cooperation will still be tested.
As Japan is scheduled to start a bilateral economic dialogue with the United States in April, the country will likely require a delicate balancing act between pursuing its own interests and taking heed of its long-time ally.
“The omission of the part about protectionism clearly reflected the stance of the United States,” said Yuji Kameoka, chief foreign exchange analyst at Daiwa Securities Co.
Kameoka said the United States is unlikely to walk away from free trade but it is gradually tilting toward protectionism to correct its trade imbalances.
“When it comes to bilateral talks, the focus is on how much Japan can resist external pressure from the United States,” he added.
Trump and Japanese Prime Minister Shinzo Abe agreed to launch the economic dialogue, a framework under which Tokyo and Washington will discuss topics ranging from the economy, trade and energy.
At the G-20 gathering in the German resort of Baden-Baden, Japanese Finance Minister Taro Aso told his peers that free trade has contributed to economic growth over the years. Aso, who will represent Japan at the economic dialogue with the United States, said there were no objections to his view.
A growing protectionist sentiment is seen by economists as a bad omen for economic growth. Trump has pulled the United States out of a Trans-Pacific partnership deal that his predecessor Barack Obama had pushed as part of his Asia pivot policy, and that Abe had hoped would strengthen Japan’s deflation-haunted economy.
Much remains to be seen over how much of what Trump has promised to do, including increased infrastructure spending and tax cuts, will be implemented and translate into economic growth even as some post-election euphoria remains in financial markets.
In the latest communique, the G-20 acknowledged that there are downside risks to the global economy and vowed to use all policy tools—monetary, fiscal and structural—to ensure sustainable and balanced growth.
“We believe in free trade,” U.S. Treasury Secretary Steven Mnuchin told reporters after the G-20 meeting. But he stressed the importance of “balanced” trade and that the United States wants to “reexamine” some trade deals.
Following their first one-on-one talks, Aso described Mnuchin as someone he finds “easy to work with,” noting that the former Wall Street banker is well-versed in monetary and financial matters.
The financial chiefs of advanced and emerging economies agreed that existing international agreements on currencies, including a pledge to refrain from competitive devaluations, should be respected. The G-20 finance chiefs also endorsed all of them in their post-meeting communique.
Trump, who has taken issue with U.S. trade deficits with China and Japan, has accused Tokyo of devaluing the yen through its monetary easing, a view dismissed by Aso and other Japanese officials.
Hideo Kumano, chief economist at the Dai-ichi Life Research Institute, said the G-20 agreement to “refrain from competitive devaluations” would make it difficult for the United States to step up criticism of Japan.
“What is important is to negotiate and take action under multilateral rather than bilateral frameworks,” Kumano said. “The G-20 needs to play a role in enabling international coordination.”
For now, the outcome of the G-20 and the Aso-Mnuchin meeting came as what one senior government official described as a relief to Japan.
But Japan may face real challenges when it grapples with the United States in the economic dialogue.
“As seen in the communique, we can see the United States shifting its weight from where it used to be under Trump, who is putting ‘America First.’ It could be China, Germany or Japan that it will demand to change,” Kumano said.