Trade Tensions Overshadow Global Economic Summit

China hopes its status as G-20 host will bring it more influence in managing the global economy

Chinese President Xi Jinping called Sunday for leaders of the United States, Germany and other major economies to resist pressure to raise trade barriers as they opened a summit amid sluggish global growth and disputes over China's steel exports and Apple's Irish tax bill.

China made trade a theme of the Group of 20 meeting even as Beijing faces complaints it is flooding world markets with low-cost steel, fueling demands for trade curbs. The president of the European Commission highlighted the conflict by calling for the summit to take action.

French President Francois Hollande says he wants other world leaders to better regulate the global economy to protect workers and the environment.

The socialist leader, whose country is known for its extensive labor rules, said France refuses globalization "without rules, where social models are pit against each other and dragged downward, where inequalities grow and intellectual property rights, and therefore cultural diversity, are threatened."

Opening the two-day meeting in this lakeside city southwest of Shanghai, Xi called for more innovation to spur economic growth and reforms to global financial and economic management. He appealed for cooperation in taxes, anti-corruption and measures to "improve the ability of the world economy to resist risks."

Chinese officials said earlier that Beijing would propose a plan to boost trade and innovation through regulatory changes and closer government cooperation.

"We should build an open world economy," Xi said before an audience that included President Barack Obama, German Chancellor Angela Merkel, British Prime Minister Theresa May and leaders from Japan, South Korea, India and other governments.

"Group of 20 countries should abide by their commitment to avoid taking new protectionist measures, strengthen investment policy cooperation and take effective action to promote trade growth," Xi said.

China hopes to use its status as this year's G-20 leader to increase its influence in global economic management. Chinese officials say they want the G-20, created to coordinate the response to the 2008 financial crisis, to take on a longer-term regulatory role.

The World Trade Organization is forecasting this year's global trade growth at an anemic 2.8 percent — its fifth straight year below 3 percent.

Leaders at the meeting have said they will call for "inclusive growth" — a reference to efforts to defuse pressure to protect local industries by spreading the benefits of closer global integration to millions of people who have been left behind by wrenching changes.

Obama stressed that theme at a separate news conference with May.

"We understand that many of our citizens are frustrated by the pace of globalization and feel they're not experiencing the benefits of international trade," Obama said. "We must all work together to spur economic growth, to boost free trade and build a fairer economy that truly works for all."

Also Sunday, the head of the European Union's governing body called for action on China's bloated steel industry.

The G-20 meeting "must urgently find a solution" to excess steel production, said Jean-Claude Juncker, president of the European Commission. He called on Beijing to accept a monitoring mechanism for overproduction that Beijing's trading partners blame for low prices and job losses.

Juncker also rejected U.S. criticism of the order for Ireland to collect $14.5 billion in back taxes from Apple. An EU panel ruled that Apple improperly received government aid in the form of tax rates that were lower than those paid by other companies. Ireland has made low taxes a part of its strategy to attract investment.

"Free trade must be fair trade," Juncker said at a news conference with Donald Tusk, president of the European Council.

Another prominent issue at the summit is G-20 member Britain's June vote to leave the 28-nation EU, seen by some analysts as the first in a wave of moves by other nations to retreat from free trade.

Germany, South Korea and other governments say they also want to use the meeting to discuss climate, energy and possible reforms to the global tax system to reduce tax evasion.

The two-day meeting began Sunday on a diplomatic high note following a joint announcement by President Barack Obama and his Chinese counterpart, Xi Jinping, that their governments had submitted documents committing them to carrying out the Paris climate agreement.

But U.S. and other officials say they plan to bring up Chinese industrial overcapacity and other potentially thorny issues. Washington has imposed import duties of up to 500 percent on Chinese steel to offset what regulators say are improper subsidies.

China, the world's biggest steel producer, has committed to reducing its production capacity by 100 to 150 million tons by 2020, a pledge Xi repeated Saturday.

"This is a global problem, but with a specific Chinese dimension we have to address," said Juncker. "We are really insisting on the need to take this seriously."

Juncker defended the EU's tax order on Apple against U.S. criticism. An EU panel concluded Apple received improper aid because it paid lower rates than other companies. Ireland has has made its low taxes part of its strategy to attract investment.

Juncker rejected suggestions the EU was targeting an American company. He said previous tax orders have affected European companies, including a January ruling that covered 35 companies, most of them from Europe.

"This is not a decision against the United States of America," said Juncker. "We are basing our decisions on facts."

Tusk affirmed the EU's stance on Britain's possible departure, saying there would be no talks with London over future relations until it formally begins the withdrawal process. Uncertainty over the status of trade, immigration and other critical issues has disrupted business activity and prompted anxiety among investors.

"We need to protect the interests of the members of the EU that want to stay together, not the one which wants to leave," said Tusk.

Speaking at a joint news conference with Obama, British Prime Minister Theresa May said her government was going ahead with its departure and was looking to create new trading opportunities

"There will be no second referendum, no attempt to turn the clock back or get out of this," said May.

The two leaders tried to downplay the impact on U.S.-British relations but Obama suggested London might have to wait to make a post-EU trade deal. He said Washington is focused on finishing trade deals with Asia-Pacific governments and the EU.

Copyright AP - Associated Press
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