March 6, 2018 / 7:05 PM / 15 days ago

EU to call on G20 finmins to keep global economy open, rules-based: draft

BRUSSELS (Reuters) - The European Union will call on financial leaders of the world’s 20 biggest economies this month to keep the global economy open, after U.S. plans for tariffs on imports of steel and aluminum created a global outcry.

Unlike the punitive tariffs the United States frequently imposes on “dumped” or unfairly subsidized goods from specified countries, President Donald Trump’s 25 percent tariff on steel and 10 percent tariff on aluminum would apply to all countries.

But they are likely to have the biggest effect on China, which produces more than half the world’s steel and is widely blamed for flooding world markets with cheap exports.

“We reaffirm our commitment to keep the global economy open and rules-based and global economic cooperation on track,” a terms-of-reference document prepared for EU finance ministers’ approval for the G20 meeting and seen by Reuters showed.

Finance ministers and central bank governors from the world’s 20 biggest economies are scheduled to meet on March 17-20 in Buenos Aires and the state of the global economy, including risks to growth, is at the top of the agenda.

Top officials round the world have warned that the plans could trigger retaliation from other economies and could cost jobs and harm trade if others followed.

The European Union threatened to hit back with tariffs on products like Harley-Davidson motorcycles, Kentucky bourbon and blue jeans if the United States follows through it its plan.

The U.S. tariffs seem to clash with Trump’s agreement last year at a G20 summit in Germany to “keep markets open noting the importance of reciprocal and mutually advantageous trade and investment frameworks and the principle of non-discrimination”.

But the final G20 leaders’ statement also said that while they would “continue to fight protectionism including all unfair trade practices”, they also recognized “the role of legitimate trade defense instruments in this regard.”

Angel Gurria, the head of the Organization for Economic Cooperation and Development (OECD), said on Tuesday excess steel capacity was an issue that should be dealt with in a global forum to avoid an escalation of trade disputes.

International Monetary Fund Managing Director Christine Lagarde said on March 1 that China should reduce excess capacity in its steel and coal industries faster and more efficiently.

Lagarde, who opposes unilateral tariff actions and has called for international trade rules to be respected, said the IMF has urged China in annual reviews of its economy for years to reduce excess steel capacity.

In its last review in August, the IMF said industrial excess capacity in steel and other sectors was not only causing tension with trading partners but was damaging to China’s medium-term growth prospects.

Reporting by Jan Strupczewski, Editing by William Maclean

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