Finance leaders warn of global growth danger

Group of 20 finance leaders yesterday said that trade and geopolitical tensions have “intensified,” risking improved global growth.

“Global growth appears to be stabilizing and is generally projected to pick up moderately later this year and into 2020,” the G20 finance leaders said in a communique issued at the meetings in Fukuoka closed.

“However, growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks and stand ready to take further action.”

It also said that G20 finance leaders had agreed to compile common rules by 2020 to close loopholes used by global tech giants such as Facebook and Google to reduce their corporate taxes.

The communique also contained pledges to increase debt transparency on the part of borrowers and creditors.

However, the final language excluded a proposed clause to “recognize the pressing need to resolve trade tensions.”

The deletion, which G20 sources said came at the insistence of the United States, shows a desire by Washington to avoid encumbrances as it increases tariffs on Chinese goods. The statement also contains no admissions that the deepening US-China trade conflict is hurting global growth.

“In our view, this is the best outcome we could deliver. Not the perfect outcome but a good outcome,” said EU Economic and Monetary Affairs Commissioner Pierre Moscovici, who admitted that reaching agreement was “not an easy task.”

“Almost everyone in the room thinks that trade tensions are a threat to growth ... It’s not always the mood in the American administration,” he said.

International Monetary Fund Managing Director Christine Lagarde emphasized that “the first priority should be to resolve the current trade tensions” while working to modernize international trading rules.

The IMF this week warned that, while growth is still expected to improve this year and next, the US-China tariff war could cut 0.5 percent from global GDP output in 2020.

US Treasury Secretary Steven Mnuchin met People’s Bank of China Governor Yi Gang yesterday in the first meeting of high-level US officials in a month. Mnuchin described the meeting as “constructive” and “a candid discussion on trade issues.”

The PBOC said that the two finance officials “exchanged views on global economic and financial situation, G20 issues, as well as topics of mutual interest.”

The quandary of reforming the global tax system to take into account the rise of internet giants such as Google and Facebook was another issue exercising the minds of policymakers in the coastal city.

In the final statement, the G20 agreed to “redouble our efforts for a consensus-based solution with a final report by 2020.”

However, here again the Fukuoka meeting exposed a difference of opinion over what form this reform should take.

Frustrated by a lack of global action on the issue, some countries such as Britain and France have already introduced a so-called digital tax, but Mnuchin was blunt in his assessment of these policies. He said the US had “significant concerns” and stated “I don’t like them.”

But Moscovici was more positive, saying he was “rather optimistic” the G20 would clinch agreement on a new set of international tax rules by 2020.