Kristian Rouz – Chiefs of the G20 finance ministries say international tensions and the threat of disruptions in global trade have intensified over the past 12 months. The ministers agree a firm response and tighter coordination between individual countries are necessary to stave off these risks, although finding an international consensus on practical measures has proven harder to achieve.
Finance ministers from the world's 20 most industrialised economies are meeting in Fukuoka, Japan, over the weekend to discuss the state of affairs in international economic relations. According to the draft communique of the meetings, the officials admit that elevated risks could pose a challenge to global economic growth.
However, the finance ministers were divided on whether to label the problem facing the global economy as "pressing" in the final version of the meetings' statement.
"A worsening of the international climate and a real trade war would lead to an even more marked slowdown in global growth, with a direct impact on our jobs, companies, factories and sectors", French Finance Minister Bruno Le Maire said.
The ministers pointed to the ongoing trade dispute between the US and China as the main challenge to global economic expansion this year.
Officials agree that a failure of both countries to reach an agreement on trade, investment, and intellectual property would have damaging spillover effects to third-party economies, most prominently, in the Asia-Pacific region, as well as across emerging markets worldwide.
Meanwhile, many economies across the world appear to have adjusted somewhat to the changing environment, the ministers said.
“Global growth appears to be stabilising and is generally projected to pick up moderately later this year and into 2020,” the draft G20 communique reportedly read.
Such modest optimism stems from the ministers' assessment of positive effects of regional and bilateral trade agreements to economic activity in the countries involved. For example, the US and the EU are bracing for talks on a bilateral trade accord amid encouraging remarks from US President Donald Trump.
His administration has repeatedly said the US is open to striking "free and fair" trade deals with its largest trading partners, with Trump himself saying he expects big trade deals with both the EU and the UK once the Brexit process is complete.
"President Trump seems to believe that the US trade deficit is because of unfair trade customs and competitive devaluation engaged in by trade partners", Takahide Kiuchi of Nomura Research Institute said. He added that the imbalance of savings and investment is a major factor as well.
Meanwhile, the EU has recently agreed to deepen trading ties with China and several Latin American countries, which G20 ministers see as a positive development.
Japanese Finance Minister Taro Aso said the global economy will likely accelerate in the second half of this year, but "downside risks still remain".
Such risks also include a softening of effective consumer demand in the world's leading economies, high levels of governmental, corporate, and private debt, as well as stagnant inflation and wages. The latter is seen as the main downside factor hindering expansion in effective disposable incomes worldwide.
Yet, global trade and politics appear to have dominated the ministers' meetings.
"Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks, and stand ready to take further action", - their draft statement reiterated.
The officials have yet to agree on their joint assessment of the risks facing the global economy, as well as propose practical solutions to the heightened threats – regardless of how "pressing" they are.