Amid growing concerns due to escalating tensions over trade, Group of 20 finance ministers ended their two-day meeting in Fukuoka with a shared message: Trade friction is a downside risk for the global economy.

While the G20 didn’t fully revert to its traditionally tough stance on protectionism, Japan, as the chair country, has done its part to balance various countries’ conflicting interests, including over trade and digital tax issues, two experts interviewed by The Japan Times said.

The communique issued after the two-day meeting in the city of Fukuoka stated that the world economy will likely gain momentum “moderately” later this year — but that risks linger.

“Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks, and stand ready to take further action,” it said.

In the past, meetings of G20 finance chiefs have served as a forum for finance leaders to voice their opposition to protectionism.

But such language disappeared from the communique starting with the 2017 meeting in light of U.S. President Donald Trump’s “America First” policy.

A senior Finance Ministry official said whether to include the phrase to oppose protectionism was not discussed at all during the session, while Japan had no plans to include it from the beginning. Asked if Japan wanted to include a more urgent message, the official declined to comment.

However, the official admitted that it took time to come up with the wording regarding trade.

At the Buenos Aires G20 finance chiefs meeting last July, they addressed “heightened trade and geopolitical tensions” as a downside risk.

Although the hard stance on protectionism was not mentioned, “I think it was good enough that the communique touched on the trade issue” under the current situation, said Hideki Matsumura, senior economist at the Japan Research Institute.

Also, in an apparent attempt to ease trade tensions, Japan made the issue of global current account imbalances one of the main themes of the meeting in order to stress that the trade balance is not the only contributing factor.

“At least, this is not something that you can easily resolve through discussing just the trade aspect or making only bilateral efforts,” Finance Minister Taro Aso said during a news conference held after the session on Sunday.

The current account of a country covers not only the balance of trade and services but also profits from investments. In general, a higher level of savings contributes to a current account surplus, while a current account deficit is related to high investment.

The communique said macroeconomic policies and structural reforms appropriate to each country’s situation are necessary to correct any imbalances.

“It seems that Japan has done everything it could on this matter at this point, as it is impossible to include language (in the statement) that directly criticizes the United States,” Matsumura said.

But the Fukuoka statement lacked specifics of what to do if the global economy actually takes a hit, Matsumura said.

The G20 members have agreed to use “all policy tools,” such as flexible fiscal policies and structural reforms to counter any downside risks.

Yet many countries have already taken easy monetary policies, so the central banks can do only a little to sustain the economy, and it’s unclear how big of a fiscal stimulus package the G20 members can afford, Matsumura said.

Apart from trade, the creation of new digital tax rules was a hot topic at the Fukuoka meeting.

The finance chiefs endorsed an OECD proposal that would change traditional tax practices based on the physical location of companies’ offices so multinational technology firms, such as Google and Facebook, which earn income through cross-border intangible products, could be taxed in a fairer way.

The OECD aims to provide outlines for a “consensus-based” solution by January and compile a final version in 2020.

Saudi Arabia is the G20 chair country next year but it does not have enough know-how to coordinate these kinds of international tax rules, so Japan’s role in getting the G20 members on the same page was significant, said Takero Doi, a professor at Keio University and well-versed in tax issues.

“The January timeline indicates that they are trying to put things together as much as possible while Japan is the chair country,” said Doi, adding that Japan has the ability to act as a go-between when there are disagreements among other nations.

The OECD has come up with three proposals for the new rule to allocate taxable profit for countries by taking into account users’ engagement, intangible assets such as data and brands, or economic presence rather than physical presence.

Still, whether it will be able to achieve the timeline remains unclear, as it says the target is “extremely ambitious given the need to revisit fundamental aspects of the international tax system.”

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