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G20 leaders confront globalization backlash

July 23, 2016

Officials are wary of voter dissatisfaction, as illustrated by the recent Brexit vote and rise of Donald Trump. US Treasury Secretary Jack Lew urged his colleagues to use all available policy tools to boost efficiency.

Treffen G20 in Chengdu China
Image: picture-alliance/AP Photo

A growing backlash against globalization has finance leaders from the world's leading economies vowing to spread the benefits of global economic growth more broadly.

At a meeting in Chengdu, China, finance ministers and central bankers from the Group of 20 countries are discussing the challenges of boosting global growth and having more people see its benefits.

The specter of protectionism and nationalism, as illustrated by the rise of Donald Trump and his ‘America First' rhetoric in the US presidential election, as well as Britain's recent vote to leave the European Union, has cast a pall over the meeting.

"The [global] recovery continues but remains weaker than desirable. Meanwhile, the benefits of growth need to be shared more broadly within countries to promote inclusiveness," according to a draft communiqué from the G20 ministers.

US Treasury Secretary Jack Lew said on Saturday that in order to boost efficiency it was important for G20 countries to use all policy tools, including monetary and fiscal policies as well as structural reforms.

Headshot of US Treasury Secretary Jack Lew.
US Treasury Secretary Lew urged colleagues to use all policy toolsImage: Reuters/Ng Han Guan

"This is a time when it is important for all of us to redouble our efforts to use all of the policy tools that we have to boost shared growth," Lew told reporters.

China's Finance Minister Lou Jiwei called for more coordination to promote sustainable growth, arguing that fiscal and monetary tools are becoming less effective at spurring economic activity.

"G20 countries should increase policy communication and coordination, form policy consensus and guide market expectations, making monetary policy more forward-looking and transparent and increase the effectiveness of fiscal policy," Lou said.

First post Brexit meeting

The gathering of G20 ministers is the first since the Brexit vote in June. This week the International Monetary Fund cut its forecast for global growth as a result of the British referendum, citing uncertainty over Britain's future trade relationship with Europe. That uncertainty is already having a chilling effect on investment and consumer confidence.

Bust shot of Philip Hammond, Britain's Chancellor of the Exchequer.
Philip Hammond, Britain's Chancellor of the Exchequer, is being pressed for more informationImage: picture-alliance/dpa/EPA/A. Rain

European officials are pressing Britain's new finance minister, Phillip Hammond, for more information.

"Brexit has already had an impact," said Italian Economy Minister Pier Carlo Padoan. "All international organizations and governments are revising downwards their growth projections due to Brexit-related uncertainty and impact on demand. So this is already a problem."

He added: "I hope that there is going to be clarification about the timing and process of the divorce. The sooner the better so this generates a new equilibrium."

Meanwhile, Turkey lobbied for the final communiqué to include an endorsement for the current government but that initiative was rejected.

"Turkey is out of the communiqué," said one unnamed G20 official.

bik/jlw (Reuters, AFP)