January 26, 2018 / 8:50 AM / 7 months ago

Breakingviews: Xi Jinping wannabes flub their lines at Davos

DAVOS, Switzerland (Reuters Breakingviews) - Xi Jinping’s would-be imitators flubbed their lines in Davos this year. World leaders including Emmanuel Macron of France, India’s Narendra Modi and German Chancellor Angela Merkel spoke in defense of global cooperation at the elite gathering in the mountain resort. But their rhetoric failed to match the Chinese president’s headline-grabbing speech a year earlier, in part because their sales pitches to investors further muddled the message.

Presidents and prime ministers are out in even greater force than usual at this year’s World Economic Forum. Leaders of six of the seven leading developed economies traveled to the Swiss talking shop - only Japanese Prime Minister Shinzo Abe was absent. That should have been the ideal opportunity to set out a clear case for a joined-up approach to global trade and financial cooperation – providing a counter to Donald Trump’s “America First” message.

The U.S. president flew into Davos fresh from slapping import tariffs on solar panels and washing machines. Meanwhile, Treasury Secretary Steven Mnuchin roiled markets by talking up the benefits of a weaker dollar for America’s exporters and, in a panel discussion on Thursday, touted reciprocity as a key element of trade policy. Both confirmed the view that Washington is no longer a reliable enforcer of the prevailing economic order.

A year ago, Xi electrified the Davos crowd with a clear statement of the benefits of an interconnected world. True, expectations were low and the Chinese president’s subsequent actions have largely failed to match the spirit of his words. Nevertheless, the stage was set for the three Ms - Modi, Merkel and Macron - to follow his lead. They largely failed to deliver.

Merkel, distracted by her efforts to form a coalition at home, made some boilerplate comments about the evils of protectionism in an otherwise humdrum speech. Both the Indian PM and the French president seemed as keen on advertising their countries as a destination for foreign investment as in shoring up the system that supports such capital flows. Campaigns like “Invest India” and “Choose France” appear closer in spirit to Trump’s zero-sum world view than the idea that all gain from a liberalized market in goods and services.

Some leaders acknowledge the tension. In the course of a one-hour speech in both French and English, former banker Macron both promoted his plan to cut domestic taxes on corporate income and bemoaned the global “race to the bottom” on taxes. It’s a reminder that while most countries recognize the dangers of restricting global trade and capital flows, none are strong enough on their own to take over America’s role in policing the system.

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CONTEXT NEWS

- European leaders on Jan. 24 warned against a return to nationalism, with France’s Emmanuel Macron and Germany’s Angela Merkel calling for more global cooperation to harness the forces of globalization.

- The speeches at the World Economic Forum in Davos, Switzerland by Merkel, Macron and Italy’s Paolo Gentiloni - leaders of the continent’s three biggest economies - came on the eve of U.S. President Donald Trump’s arrival at the annual summit in the Swiss Alps.

  - Macron called for a “global compact” to address the economic forces that have led to rising inequality and a surge in populism. “We have a situation where people are being told, on social and financial issues, that the answer is to do less, to cut our taxes, there is no limit, it’s a race to the bottom,” he said.

- “If we aren’t able to agree a standard of international cooperation, we will never convince the middle class, the working class that globalization is good for them.”

- Merkel said isolationism and protectionism were not solutions to the world’s economic problems. “If we feel things are not fair, if there is no reciprocity we have to seek multilateral answers and not follow a protectionist course,” she said.

- For previous columns by the author, Reuters customers can click on [LARSEN/]

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Chinese President Xi Jinping speaks during a press conference with French President Emmanuel Macron (not seen) in Beijing, China, January 9, 2018. REUTERS/Ludovic Marin/Pool

Editing by Rob Cox and Martin Langfield

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