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Commentary

G20 Finance Ministers and Central Bank Governors Meet in Baden-Baden

Brittaney Warren, G7 Research Group
March 18, 2017

In Baden-Baden, Germany, on March 18, 2017, G20 finance ministers and central bank governors concluded their first meeting in the lead-up to the G20 Hamburg Summit scheduled for July 7-8, 2017. Their meeting was particularly significant and highly anticipated as it marked the first time G20 finance ministers and bank governors would meet with the new U.S. treasury secretary Steven Mnuchin. Moreover, it came in the wake of the release of U.S. president Donald Trump's proposed budget, "America First: A Budget Blueprint to Make America Great Again," which envisions spending increases for the Department of Defense and spending cuts for nearly everything else. Given the additional assaults Trump and his team had repeatedly made on key issues, such as exchange rate misalignment by China and Germany, financial regulation, trade and climate change, the proposed budget did not quell any uncertainties over what approach Mnuchin would bring to Germany. The meeting also overlapped, and was perhaps overshadowed by, another high-level encounter. On March 17, President Trump and G20 host and German chancellor Angela Merkel held their first face-to-face meeting and joint news conference. Despite visible tensions between the two leaders and the unpredictability of the U.S. administration, G20 finance ministers and bank governors at Baden-Baden found much common ground on which to advance cooperatively. This was most clearly indicated in the 28 politically binding and action-oriented commitments they made in their collective communiqué. It was at the same high level as the year before.

Of these 28 commitments from Baden-Baden, the most came on financial regulation with seven and on macroeconomic policy and taxation with five each. Next came international cooperation with four. These included commitments that addressed more than one issue and that included an outcome to increase cooperation. One of these commitments broadly sought to increase cooperation on economic and financial issues, one sought to increase cooperation between the International Monetary Fund (IMF) and regional financing arrangements, and two sought to broaden international economic and financial cooperation with African countries. This reflected the German priorities of strengthening resilience as well as its focus on African development. Next came international institutional reform with three commitments. All three centred on building a "strong, quota-based and adequately resourced IMF." The remaining four commitments also covered several subjects. There was one commitment on terrorist financing; one on strengthening the G7-created Financial Action Task Force, mandated to monitor crime and corruption; one on remittances; and one on energy — to eliminate inefficient fossil fuel subsidies.

The digital economy was referenced in two of the 28 commitments. This is a new area for the G20 finance ministers and central bank governors; it was not addressed in the 29 commitments made at their earlier meeting in Chengdu, China, on July 24, 2016, in the lead-up to the G20 Hangzhou Summit on September 4-5, 2016. One of the Baden-Baden commitments sought to promote financial service and institutional resiliency against "the malicious use of ICT." The other was a taxation commitment in which the ministers pledged to work on digitalization for taxation through the Organisation for Economic Co-operation and Development's Task Force on the Digital Economy.

The ministers and bank governors, however, left out several key issues: antiprotectionism, climate change, health, steel overcapacity, and the Sustainable Development Goals (SDGs) or the 2030 Agenda. In 2016 G20 finance ministers and central bank governors made a strong statement in which they committed to "resist all forms of protectionism." This was completely absent from the 2017 Baden-Baden communiqué, and no other trade commitments were made or took its place. This reflects Trump's pro-protectionist view. Climate change also fell completely off the agenda. At Chengdu, finance ministers and bank governors committed to work on climate finance in line with the United Nations Framework Convention on Climate Change (UNFCCC). With Trump's big budget cuts for the U.S. Environmental Protection Agency, strong support for pipelines and coal, and legislation removing limits on industrial pollution, the absence of climate finance is no surprise. Exploring measures to address market failures in response to the threat of antimicrobial resistance, addressing excess steel capacity (an issue closely related to climate change as coal is a production input), and the SDGs were all issues addressed at Chengdu but not at Baden-Baden.

Removing these issues from the agenda is a too-cautious response to Donald Trump and demonstrates a failure of leadership on the part of the ministers and bank governors. A resilient financial and economic system cannot be achieved without a resilient planet and a healthy population, while closed borders negates the realities and benefits of a globalized world. At Hamburg, will G20 leaders lead if their ministers will not?

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Brittaney Warren is a researcher with the G7 and G8 Research Group, the G20 Research Group and the BRICS Research Group, based at the Munk School of Global Affairs in Trinity College at the University of Toronto. She has worked in Spain and in Peru where she conducted field research on a sustainable development project with women living in extreme poverty. She has conducted research on the compliance of CARICOM members with their summit commitments on non-communicable diseases. Brittaney leads the social media strategy and marketing program for the G7 and G20 Research Groups' books and works on climate change, and was the lead researcher on an e-book project on "Delivering Sustainable Energy Access." Follow her at @brittaneywarren.

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