BARI, ITALY – Finance Minister Taro Aso and some of his Group of Seven peers on Friday kept up their struggle to get U.S. Treasury Secretary Steve Mnuchin to budge from a view of economics that remains far removed from what the G-7 is used to.
During a two-day G-7 financial meeting that ran through Saturday in Bari, Italy, the finance chiefs sought to draw Mnuchin toward their previous consensus on free trade, despite a formal agenda that avoided pursuing that too explicitly by focusing on “inclusive growth” to address inequality.
“Many of us told Mr. Mnuchin that it is unthinkable that in the weeks and months to come, we can allow the established framework to be debated,” French Finance Minister Michel Sapin told reporters. “It is unthinkable, and it will not happen, that we destroy the framework that has given us stability and economic growth.”
Italy, which presides over the G-7 this year, is poised to send a message of unity in a joint statement after the meeting on fighting inequality — an issue that apparently propelled an anti-globalism candidate into the French presidential runoff vote on May 7, fueled Donald Trump’s ascent to the U.S. presidency and played a role in Britain’s decision to exit the European Union.
Referring to his remarks at Friday’s session, Finance Minister Taro Aso told reporters, “We should not oppose free trade on the pretext of achieving inclusiveness or addressing inequality.
“We should recognize that free trade has contributed to economic prosperity in many economies.”
Speaking to reporters separately, Bank of Japan Gov. Haruhiko Kuroda said protectionism and rejection of technological innovation and globalization will not address inequality.
“Inequality won’t shrink by denying free trade and supporting protectionism — rather, it’s the opposite,” Kuroda said. “I think that’s the consensus among many of us.
“Stopping technological innovation, scrapping globalization and going with protectionism won’t be the solution at all,” Kuroda said. “We advance with the innovation and keep free trade to enlarge the pie of the economy for a better redistribution and boosting support for those in need. To do that, we need economic growth.”
A senior Japanese official said the finance chiefs and central bank governors of Britain, Canada, France, Germany, Italy, Japan and the U.S. did not discuss trade policy itself, but some of them made remarks that are similar to Aso’s.
Trade issues are likely to be taken up at a G-7 leaders’ summit from May 26 to 27 in Taormina, Sicily.
Under pressure from the U.S., finance chiefs from the Group of Twenty major economies — including the G-7 — dropped their traditional pledge to “resist all forms of protectionism” from a communique issued after their meeting in March in Germany.
During Friday’s talks, Aso said China has conducted “opaque” capital controls in response to heavy capital outflows that the world’s second-largest economy has observed since 2014.
Aso referred to concern that such controls “have hindered foreign companies, including those in Japan, from sending money to their home countries, similar to how they cannot bring foreign currencies out of (China).”
“I requested the IMF to closely monitor China’s capital controls on the ground that the international community needs to pay attention to such movements, as well,” he said.
Several G-7 finance chiefs also expressed concern about the Chinese economy, including its excess credit and overproduction of steel and other items, according to the senior Japanese official.
Meeting on the sidelines Friday, Aso and U.S. Treasury Secretary Mnuchin affirmed close coordination over sanctions on North Korea, the senior Japanese official said.
Coordination between the Finance Ministry in Tokyo and the U.S. Treasury Department is part of international efforts to rein in North Korea’s aggressive development of nuclear weapons and carrier missiles.
At the talks, Aso and Mnuchin did not discuss currency and trade issues, the official told reporters, requesting anonymity, adding that Mnuchin briefed Aso about a new U.S. tax plan unveiled last month.
The proposed overhaul will cut the corporate tax rate to 15 percent from 35 percent. But it does not include a controversial border adjustment tariff, an omission that will allow Japanese and other foreign manufacturers which export their products to the world’s largest market to breathe a sigh of relief.
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