The world’s biggest economies will work to support global growth and
better share the benefits of trade, policymakers said on July 24 after a
meeting dominated by the impact of Britain’s exit from Europe and fears of rising protectionism.
Philip
Hammond, Britain’s new finance minister, said the uncertainty about
Brexit would begin to abate once Britain laid out a vision for a future
relationship with Europe, which could become clearer later this year.
But
there could be volatility in financial markets throughout the
negotiations in the years ahead, Hammond said after the meeting of
finance ministers and central bankers from the Group of 20 (G-20) major
economies in China’s southwestern city of Chengdu.
“What will
start to reduce uncertainty is when we are able to set out more clearly
the kind of arrangement we envisage going forward with the European
Union,” Hammond told reporters.
“If our European Union
partners respond to such a vision positively – obviously it will be
subject to negotiation – so that there is a sense perhaps later this
year that we are all on the same page in terms of where we expect to be
going. I think that will send a reassuring signal to the business
community and to markets.”
A communique issued by the G-20
ministers at the end of the two-day meeting said Brexit, which dominated
discussions, had added to uncertainty in the global economy where
growth was “weaker than desirable”. It added that members, however, were
“well positioned to proactively address the potential economic and
financial consequences.”
“In light of recent developments, we
reiterate our determination to use all policy tools – monetary, fiscal
and structural – individually and collectively to achieve our goal of
strong, sustainable, balanced and inclusive growth.”
The International Monetary Fund this week cut its global growth forecasts because of the Brexit vote.
Whereas
monetary policy figured prominently in previous meetings of G20
financial officials, Bank of France Governor Francois Villeroy de Galhau
said there was very little debate this time and discussions focused
instead on growth.
That was echoed by others.
There was
broad consensus that the global economy needed more growth, U.S.
Treasury Secretary Jack Lew told reporters, while Chinese Finance
Minister Lou Jiwei said it had been easier to forge consensus because
the global recovery remained weak.
The specter of protectionism,
highlighted not only by Brexit but also by U.S. Republican presidential
candidate Donald Trump’s “America First” rhetoric and talk of pulling
out of trade agreements, was also a focus for the policymakers.
“Not
only Brexit but various risks of low growth remain, and there was a lot
of debate on the need of monitoring developments including terrorism,
geopolitical risks and refugees,” said a Japanese finance ministry
official. “A lot of concerns were voiced over spreading measures for
protectionism.”
In the communique, the G-20 underscored “the
role of open trade policies and a strong and secure global trading
system in promoting inclusive global economic growth, and we will make
further efforts to revitalise global trade and lift investment.”
It
recognized problems wrought by industrial overcapacity, particularly
the steel sector, which had a negative impact on trade and workers.
Overcapacity was a “global issue which requires collective responses”.
“We
also recognize that subsidies and other types of support from
governments or government-sponsored institutions can cause market
distortions and contribute to global excess capacity and therefore
require attention,” the communique said.
