G7 finance ministers and central bank chiefs were to begin meeting in Rome late yesterday to discuss the global financial crisis amid stern warnings against protectionism.
Japanese Finance Minister Shoichi Nakagawa warned that his delegation would take a “resolute stance” against protectionism at the two-day meeting of the G7 economic powers, calling it “absolute evil.”
“For the US, Europe and other countries that sought liberalization from Japan to run to protectionism is an absolute evil,” Nakagawa told reporters before leaving for Rome.
Nakagawa said on Tuesday that the G7 nations — Britain, Canada, France, Germany, Italy, Japan and the US — were expected to discuss the “Buy American” clause in a US economic stimulus package.
Japan, the EU and Canada have fiercely attacked the clause, warning it could start a global round of tit-for-tat trade reprisals and set a bad example for other countries mulling their own stimulus projects.
US senators voted last week to soften the clause, which barred spending on a project unless all the iron, steel and manufactured goods involved are made in the US.
Meanwhile, France has fiercely defended its plan to pump billions of dollars into its struggling auto sector against EU charges of protectionism.
The plan has been sharply criticized by Slovakia and the Czech Republic, which currently holds the EU presidency. Both countries host foreign-owned car factories on their territory.
The Italian finance ministry said ahead of the meeting: “Fostering a common framework for policy action and fighting protectionist pressures, which tend to gain strength in difficult economic conditions, will be the centerpiece of our work.”
Meanwhile, the World Bank said on Thursday that the global economic crisis was driving millions into poverty in developing countries and urged the G7 to address the issue in Rome.
The World Bank said new research found that up to 53 million more people have been trapped in poverty amid the spreading economic crisis exacerbated by a financial system meltdown in September.
World Bank president Robert Zoellick, who will be attending the meeting, said that world leaders must not forget the needs of the most vulnerable.
Meanwhile, IMF managing director Dominique Strauss-Kahn warned governments against protectionism “through the back door” on Thursday, as they seek to prime their economies in the midst of the global economic downturn.
Speaking ahead of a G7 meeting, the IMF boss said it was unlikely that governments would resort to openly protectionist measures — notably raising tariff barriers — but he said there was a “really big” risk that the financial sector could be hit by a wave of protectionism.
“When governments provide some new resources or recapitalization of banks, they may add some comment saying that the money should stay at home,” Strauss-Kahn said.
He also said there was a risk of ‘”buy national” provisions being attached to stimulus packages, like that considered by US lawmakers.
“You may have in different stimulus packages some comment or amendment saying that this money also should be used to buy national products, and these kinds of things. So this kind of protectionism may come back,” he said.
His comments come as the US Congress takes the final steps toward approving a US$789 billion package aimed at stimulating the world’s largest economy.