G20 leaders talking publicly about opening trade, but are tightening import controls
Despite speaking out against protectionism, the number of restrictions imposed by governments worldwide on imports soared to 150 in the first quarter of this year
Exporting & Importing
BEIJING—Leaders of the United States, China and other Group of 20 major economies who meet this weekend say more trade would shore up sluggish global growth but are tightening their own controls on imports.
China hopes its status as G20 host will give it more sway in managing the global economy and has made trade a theme of the meeting in Hangzhou, a scenic lakeside city southwest of Shanghai. Chinese officials say Beijing will propose a plan to promote commerce through co-operation in finance, tax and energy.
Governments also have said they want to discuss climate change, efforts to reduce surplus production capacity in steel and other industries and limits on use of tax havens, though no detailed agreements are expected.
U.S. President Barack Obama, German Chancellor Angela Merkel and other leaders will speak out against protectionism, their governments say. But at the same time, G20 governments are ratcheting up restraints on imports of steel and other goods, prompting concern support for global trade might be eroding.
The summit is the first global event for British Prime Minister Theresa May after her country’s June vote to leave the European Union, a move seen by some political analysts as the start of a possible wave of nations pulling back from economic integration. In the United States, France and elsewhere, politicians are calling for protection for local industry.
“Protectionism is resurfacing,” said a Chinese deputy foreign minister, Li Baodong. “In many parts of the world, we have seen calls for deglobalization.”
This year’s global trade growth is forecast by the World Trade Organization at an anemic 2.8 per cent—its fifth straight year below 3 per cent. Global economic growth is forecast by the International Monetary Fund at an equally lacklustre 3.4 per cent.
Progress on initiatives such as Obama’s Trans-Pacific Partnership and a WTO plan to help poor countries integrate into global markets has stalled. On Sunday, German Economy Minister Sigmar Gabriel said talks on a U.S.-European trade deal “have de facto failed,” though EU officials denied that.
In Hangzhou, Obama will call for an “open, integrated global economy,” according to a senior American official who described the government’s plans on condition of anonymity.
“There are very real concerns about globalization and technology, but the answer cannot be to close ourselves off,” the official said in an email.
Leaders including South Korean President Park Geun-hye say they will call for “inclusive growth,” a reference to spreading economic benefits to millions of people who have been left behind by wrenching change.
Yet despite such endorsements, G20 economies including the United States, Japan and Canada are tightening import controls in response to what they say are unfair foreign tactics—and the trend is accelerating.
The number of restrictions imposed by governments worldwide on imports from machine parts to sugar soared to 150 in the first quarter of this year, according to researchers Simon J. Evenett and Johannes Fritz of the Centre for Economic Policy Research in London. That was up 50 to 100 such measures imposed during the same periods of 2010-15.
The United States has imposed import duties of up to 500 per cent on Chinese steel to offset what it says are improper subsidies. Unions for European steelworkers are calling for investigations of low-cost Chinese steel exports they say threaten thousands of jobs. China hit back in April by hiking its own tariffs on European steel.
“In a world where global commerce isn’t growing any more, governments may conclude that securing larger slices of the world market ultimately requires tilting the commercial landscape against foreign firms,” said Evenett and Fritz in a report in July.
That raises the possibility of a “negative feedback loop” of governments responding to weak trade by doing more to protect their companies, further depressing trade, said Evenett and Fritz.
So far, protectionist measures don’t appear to be to blame for the latest trade slump, said Andrew Kenningham of Capital Economics. It is due mostly to the end of an era of rapid growth driven by China’s integration into the global economy and manufacturing supply chains.
“Admittedly, there has been an increase in the absolute number of trade-distorting measures implemented,” said Kenningham in an email. “However, they have affected only a very small fraction of products traded.”
In May, the EU parliament passed a resolution calling for controls on Chinese imports in the event Beijing is declared a market economy, a status that makes it harder to pursue trade cases.
“Politicians on the right or on the far left are talking about closing our market,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “This would be terrible.”
China has massive surplus production capacity in industries including steel, cement and coal that mushroomed in size during the economic boom. That has prompted complaints Beijing is trying to clear a backlog by subsidizing exports.
“While so much attention is focused on tariffs targeting dumped steel, in fact, state incentives to promote steel exports are a far larger systemic problem,” said Evenett and Fritz.
Envoys in Hangzhou plan to discuss how to reduce global production capacity for steel, according to Wally Adeyemo, Obama’s deputy national security adviser for international economics.
Beijing issued plans in February to reduce the size of its steel and coal industries. Plans for other industries including aluminum, glass and solar panels have yet to be announced.
AP Business Writers Youkyung Lee in Seoul and David McHugh in Frankfurt, AP Writer Frank Jordans in Berlin and AP Economics Writer Paul Wiseman in Washington contributed.