By Marcela Ayres
WASHINGTON (Reuters) -Finance chiefs from the leading developed and emerging economies see “good prospects” for a soft landing for the global economy, and they have committed to resist protectionism, according to a G20 draft communique seen by Reuters on Wednesday ahead of the group’s meeting this week.
The document, which a source said may still be revised, lands as global finance ministers gather this week in Washington for the annual meetings of the International Monetary Fund and World Bank amid rising confidence that central banks, including the U.S. Federal Reserve, have successfully beaten back inflation without crippling growth or employment.
But it also reflects palpable concerns that that promising scenario could be upended should a global trade war break out in the event Donald Trump is elected U.S. president in less than two weeks.
“We observe good prospects of a soft landing of the global economy, although multiple challenges remain,” according to the draft, which Reuters reviewed ahead of a G20 finance ministers gathering set for Thursday.
“We are reassured by the fact that economic activity has proved to be more resilient than expected in many parts of the world,” the draft said. “Still, growth has been highly uneven across countries, contributing to the risk of economic divergence.”
The ministers commended central banks’ “well-calibrated monetary policies” that have brought inflation largely under control and have allowed a global shift to lower interest rates.
TRADE WAR CONCERNS
Still, concerns continue to swirl around the outlook, which features medium- and long-term estimates for global growth that are below historic trend levels. Indeed, leading the list of concerns is the prospect of global trade strife should Trump, who has pledged to impose a global 10% tariff on all goods imported to the U.S. and a 60% levy on imports from China, win the Nov. 5 election.
“We commit to resist protectionism and encourage concerted efforts to support a rules-based, non-discriminatory, fair, open, inclusive, equitable, sustainable and transparent multilateral trading system with the World Trade Organization (WTO) at its core and continue to support the reform efforts of the organization by its members,” the draft said.
Brazil’s Finance Minister Fernando Haddad on Wednesday expressed confidence that G20 finance leaders would approve a joint statement, reflecting consensus in their discussions, after successfully doing so at their last meeting in July.
The draft communique has kept the language agreed upon in July regarding the group’s commitment to tax transparency and fostering global dialogue on effective taxation, including of “ultra-high-net-worth individuals.”
While the commitment stops short of endorsing a global tax on billionaires – an idea introduced by Brazil’s G20 presidency – it was viewed as a victory by the delegation of Latin America’s largest economy for keeping the issue on the agenda and politically strengthening any proposals that individual countries may present, two sources told Reuters.
However, both sources acknowledged that the real challenge will come at the leaders’ summit next month, as a potential Trump victory could prompt those who have privately opposed the proposal to publicly take a stance against the need for more progressive taxation on billionaires, including Argentina’s Javier Milei.