This is an unusual time. The US has often played a leading role in shaping the global financial architecture.As a result of last year’s election, the US appears to be defecting from that global system that it helped build, while others, who often seem to chafe under US leadership, are defending it.  

The G20 finance ministers and central bankers meet at the end of next week. It is the first such meeting for the new US Treasury Secretary Mnuchin, who according to press reports, is struggling to put together his senior team. Nevertheless, An early draft of the statement has been leaked to the news wires. There are clear signs that some accommodation is being made to the new US administration. There are three areas that draw our attention. 

First, the draft statement drops the pledge to resist protectionism. It still endorses “open and fair” international trade, and reaffirms the commitment to reducing the excessive imbalance.  

Second, the statement issued last summer called for countries to refrain from competitive devaluations and not use the foreign exchange for competitive purposes. This is what we have compared with an arms control agreement. This was dropped in the draft statement, and replaced by “affirming previous foreign exchange commitments.” It may be a shorthand for the draft.It will be interesting to see how this evolves in future drafts, and of course, in the final statement.  

Third, the G20 do not just call for markets to determine foreign exchange rates, but also argues against excess volatility. This reference also appears to have been dropped in the draft.  

The draft statement is often managed by the host country, in this case, German. It is not clear how much the US participated in shaping the draft and how much the Sherpas tried anticipating the US administration’s position.