G20 financial leaders seek “free trade” pledge amid US tariffs concern

The main focus of the G20 talks is the threat of a trade war between the US and its trading partners, particularly China and the European Union. (Reuters)
Updated 19 March 2018
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G20 financial leaders seek “free trade” pledge amid US tariffs concern

BUENOS AIRES: The world’s financial leaders were seeking on Monday to clearly endorse free trade and renounce protectionism amid concern that US tariffs on steel and aluminum and looming actions against China could trigger a trade war that would hurt global growth.
Finance ministers and central bank governors of the world’s 20 biggest economies are meeting in Buenos Aires to discuss the economic outlook, capital flows, cryptocurrencies like Bitcoin, and how to prevent tax avoidance by international companies.
But since the unilateral decision by US President Donald Trump on March 8 to impose tariffs of 25 percent on steel and 10 percent on aluminum, trade has become the focal point of the meeting.
“I am seriously concerned that the foundation of our prosperity — free trade — is being put at risk,” German Finance Minister Olaf Scholz told German mass-selling daily Bild.
“Protectionism is not the answer to the difficulties of our time. The situation is serious,” he said, adding he would be cautious yet about using the term trade “war.”
On Sunday Scholz said he would seek to dissuade Washington from imposing the planned punitive steel and aluminum tariffs which only come into effect on March 23.
Others at the G20 meeting, which will conclude on Tuesday with a joint communique, shared Germany’s concern.
“There is a solid understanding among the global community that free trade is important,” Japanese central bank governor Haruhiko Kuroda told reporters upon arrival for the talks. Brazilian Central Bank governor Ilan Goldfajn also called on the G20 to work to keep global trade flows open.
The US import tariffs on steel and aluminum have raised alarms among trading partners that Trump is following through on his threats to dismantle the decades-old trading system based around World Trade Organization rules in favor of unilateral US actions.
Potentially broader anti-China tariffs and investment restrictions under consideration as part of a US intellectual property probe have raised concerns that retaliation could seriously diminish global trade and choke off the strongest global growth since the G20 was formed during the 2008 financial crisis.
Morgan Stanley economists said in a report to clients late on Sunday that a broad-based application of US “Section 301” remedies resulting in a 20 percent tariff on Chinese manufactured goods, coupled with a commensurate response from China, would slash annual growth rates in both countries by a full percentage point within a year.
An early draft of the G20 communique seen by Reuters contained the phrase “international trade and investment are important engines of growth.”
It also said that G20 finance ministers stood by an agreement reached by their leaders in July last year in Hamburg.
A G20 official said discussions now centered on whether that language on trade would remain in the communique, which has to be endorsed unanimously, including by the United States.
The agreement from Hamburg, to which the Buenos Aires draft referred, said: “We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements.”
Unilateral decisions by the United States to impose tariffs are seen as going against negotiated, or “multilateral” measures that would be part of the WTO.
The draft G20 communique also said that while the global economic outlook has been improving, “a retreat to inward looking policies” — suggesting protectionist trade practices — was a risk to growth.


No need for more talks over draft budget: Lebanon finance minister

Updated 21 May 2019
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No need for more talks over draft budget: Lebanon finance minister

  • Lebanon’s proposed austerity budget may please international lenders but it could enrage sectors of society
  • Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may go on.
The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.
“There is no longer need for too much talking or anything that calls for delay. I have presented all the numbers in their final form,” Finance Minister Ali Hassan Khalil said.
But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”
While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.
President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice “a little“: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”
“We import from abroad, we don’t produce anything ... So what we did was necessary and the citizens won’t realize its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.
A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.
It also includes a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.
“DEVIL IN THE DETAIL“
Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.
“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.
Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”
“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilize the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.
The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.
Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.
Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.
Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.
On Monday, veterans fearing cuts to their pensions and benefits burned tires outside the parliament building where the cabinet met. Police used water cannon to drive them back.