News
Fear of China takes over the G-7 with draft warning about “harmful” trade
(Bloomberg) — China’s outsized role in world trade is alarming global financial chiefs, who are prepared to forge a united front in Italy, preparing their countries to challenge “harmful practices.”
Bloomberg’s Most Read
A draft communiqué formulated at the Group of Seven meeting in the seaside resort of Stresa introduces a much stronger common language than that adopted by the club just a year ago, when it met in Niigata, Japan, and last month, in Washington.
“We will advance our cooperation to increase global economic resilience and economic security and protect our economies from shocks and systemic vulnerabilities,” the authorities say in the document seen by Bloomberg. “To do this, we will work to make our supply chains more resilient, reliable, diverse and sustainable and to respond to harmful practices, while safeguarding critical and emerging technologies.”
This formulation was absent in previous declarations, the content of which referred only to a “free, fair and rules-based multilateral system”.
The move would pose the risk of an escalation just months before the US elections, which could return Donald Trump to the White House – along with his appetite for confrontation and his fondness for trade tariffs.
At the same time, the USA, China and the European Union are already preparing increasingly assertive trade measures.
The statement could still change before it is formally approved. Ministers will continue their meetings on Saturday before adopting a jointly formulated document.
Growing concerns
Several officials who spoke during the meeting suggested growing concerns that China’s industrial potential could be undermining its own economies.
“One of the discussions we had was about trade rules with China and the need to resolve the issue of industrial excess capacity,” French Finance Minister Bruno Le Maire said on Friday. “We need to have a common and strong answer to this question.”
The draft statement also addressed the state of the global economy, noting that it “has demonstrated greater resilience than expected against multiple shocks.”
The document shows ministers acknowledging that the consumer price shock that has hit their countries over the past two years may not be completely over.
“Labor markets remain relatively robust and inflation has continued to moderate, although underlying inflation is showing some persistence, particularly in the services sector”, they stated in the project.
The story continues
Ministers also addressed the divergence currently observed across the group, where expansion is unevenly oriented toward the US, while other members see much less momentum.
“It is likely that global economic growth will remain below its historical average and heterogeneous between countries and regions”, says the project. “The economic outlook remains subject to risks amid the threat of escalating geopolitical tensions and volatile energy prices.”
Although fiscal issues have not had a prominent place on the G-7 agenda, ministers appear to be uniting on the need to repair public finances in the medium term, at a time when most member countries face growing debt burdens. debts that already exceed 100% of production, sometimes considerably.
“The gradual rebuilding of fiscal reserves is a key priority to strengthen fiscal sustainability and create more space to respond to new shocks, while continuing to protect the most vulnerable and make the necessary investment to promote sustainability and resilience, complemented for an ambitious structural reform agenda to increase growth. potential”, says the draft.
Ministers appear determined to reaffirm their previous language on currencies, while ensuring “sound and well-communicated macroeconomic and structural policies, while striving to limit negative repercussions through clear communication”.
–With assistance from Alessandra Migliaccio, William Horobin, Kamil Kowalcze, Toru Fujioka, Viktoria Dendrinou and Tom Rees.
Bloomberg Businessweek Most Read
©2024 Bloomberg LP