© Reuters. FILE PHOTO – Mnuchin speaks at a press conference at the White House in Washington.
By David Lawder
BADEN BADEN, Germany (Reuters) – Distrustful of his first official meeting with the tempestuous trade agenda of the US president, Donald Trump, the top finance officials of the world were relieved to finding a new secretary of the Treasury, Steven Mnuchin, courteous and formal during the weekend.
But they gave ground to the push from newcomers for the Group of 20 major economies to abandon a decade-long promise to resist protectionism and remove language from the communiqué on financing the fight against climate change.
According to G20 officials who interacted with Mnuchin at the meeting in the spa and casino town of Baden-Baden, Germany, many chose not to challenge Mnuchin over protectionist language.
Instead, they opted to give him and the new Trump administration some space to refine their business views in hopes of restraint when Germany hosts the G20 leaders’ summit in July.
Five weeks into his new job, the former commercial banker and former Goldman Sachs (NYSE 🙂 is currently the only Trump appointee confirmed by the Senate who works at the Treasury. And the Trump administration has yet to decide on the specific policies it will use to deliver on campaign promises to reduce the United States trade deficit and increase manufacturing jobs in the United States.
Options being considered range from more aggressive efforts to enforce anti-dumping laws to renegotiating trade agreements and enacting a proposed border tax on imports. During his campaign, Trump threatened to apply unilateral tariffs on Mexican and Chinese products and said he would renounce the North American Free Trade Agreement unless it is renegotiated to his liking.
“We have a new administration in Washington that has yet to precisely define its narrative, especially in the context of what was said in the campaign,” said Pierre Moscovici, minister for Economic Affairs at the European Commission.
“I think Mnuchin is an articulate, constructive and pragmatic man,” Moscovici said. “More work needs to be done to find common ground. I wasn’t ready here. It’s not a total surprise.”
The Japanese Finance Minister Taro Aso, who tangled with the predecessor of Mnuchin, Jack Lew, the year passed by the volatility of the exchange rate of the dollar-yen, said he was impressed with understanding Mnuchin of the economy and markets financial
“So I think we can do good business together,” Aso told reporters.
In the plenary sessions of the G20, Mnuchin spoke only once, reading a prepared statement, according to an official of the G20, while their counterparts in China and France strongly argued in favor of maintaining the commitment against protectionism.
While Mnuchin concentrated on making good first impressions with his G20 counterparts, US negotiators behind the scenes insisted that they could no longer accept the old language that promised “to resist all forms of protectionism.”
This was replaced by a watered-down promise to “strengthen the contribution of trade to our economies,” language that some participants believe preserves the flexibility of the United States in trade policy.
German Finance Minister Wolfgang Schaeuble, who met with Mnuchin in Berlin before the Baden Baden meeting, said no consensus could be reached on the meaning of protectionism.
At a press conference, he suggested that Mnuchin may not have had a clear mandate to negotiate on trade issues.
When asked about this, Mnuchin said he knows Trump’s business wishes and negotiated them from Baden Baden, adding: “the new language makes sense.”
Removing a “ritual phrase” from the core language of the G20 could over time diminish the influence of the United States, said Eswar Prasad, a former International Monetary Fund official and professor of trade policy at Cornell University.
“The United States may have won this battle by forcefully imposing its will on the rest of the G20, but the result represents a step backward in US global leadership on issues such as promoting free trade and fighting climate change,” Prasad said.
But the meeting in Baden Baden established Mnuchin as a pragmatic operator in the campaign Trump administration for a playing field more level in trade, said Domenico Lombardi, another former official of the IMF who now works at the Center for Innovation International Governance, a Canadian think tank.
“It would be in the interest of Germany and Europe to establish a strong bilateral relationship with the new Treasury secretary rather than question his authority,” Lombardi said. “The alternative for them would be to negotiate directly with Trump and that would be worse.”