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Protectionism to Be on Minds of Many at G-7 Finance Meeting

FILE - Treasury Secretary Steve Mnuchin takes a question in the briefing room of the White House in Washington, April 26, 2017, where he discussed President Donald Trump's tax proposals.

Europe, Japan and Canada hope a G-7 meeting in Italy this week will give them a better picture of U.S. President Donald Trump's direction on key policies that he has yet to spell out.

The official agenda for Group of Seven finance ministers and central bankers in the city of Bari from Thursday to Saturday focuses on inequality, international tax rules, cybersecurity and efforts to block terrorism funding.

However, many participants will be looking to Treasury Secretary Steven Mnuchin to gauge U.S. intentions on issues where Trump has threatened to upset the group's consensus: protectionism and climate change.

"It will be another chance to learn what the U.S. government is thinking and planning," said a G-7 official at one of several briefings by national delegations this week.

At a meeting of the larger Group of 20 financial chiefs in Germany in March, ministers dropped their traditional pledge to keep global free trade open, acquiescing to an increasingly protectionist United States.

Paris agreement

Trump will decide whether to quit the global Paris agreement on climate change — a campaign promise — after meeting leaders at a G-7 summit on May 26-27, the White House has said.

"The important thing is that Mnuchin will be there, with a clearer picture of U.S. policies than was available in previous weeks and months," said another G-7 official who also asked not to be named.

Reflecting tensions over Trump's attitude to protectionism, there will be no formal discussion of trade in Bari, Italian Treasury officials said. The subject will be tackled at the summit, in Taormina, Sicily, at the end of May.

"Everyone is concerned about the U.S. attitude towards protectionism," said the second G-7 official, who called Trump's focus on bilateral trade surpluses or deficits a "poisonous" notion of what fair trade policy should entail.

The closing statement from Bari will reiterate a warning against competitive devaluations, Italian officials said, as March's G-20 did, allaying fears that the new U.S. administration might weaken the G-20's united front on global currency policy.

FILE - A security worker brings money to a National Bank branch in Athens, Greece, June 28, 2015.
FILE - A security worker brings money to a National Bank branch in Athens, Greece, June 28, 2015.

While not on the official agenda, sources said there would also be discussion of debt relief for Greece ahead of a May 22 meeting of eurozone finance ministers on the disbursement of new loans for Athens.

Greece's creditors, including the European Central Bank and the International Monetary Fund, will be in Bari. The IMF is pushing for rapid debt relief measures for Greece, but eurozone governments say this is still premature.

On taxation, G-7 ministers will sign the Bari Declaration for Fighting Tax Crimes and Other Illicit Financial Flows and promise to seek more effective ways to tackle money laundering, international tax evasion and financing of terrorism.

Italian Economy Minister Pier Carlo Padoan said last week that Italy would "do everything we can" to push for more effective international rules on the taxation of global internet companies, but he admitted to "different positions within the G-7" on the issue, which was likely to hinder progress.

Italy, which has one of the world's most sluggish economies and has seen a sharp rise in poverty and income inequality over the last decade, was keen to make "inclusive growth" the main focus of the meeting.

However, the "Bari Policy Agenda" to be signed there will not commit to specific measures but will suggest approaches for countries to tackle inequality depending on their circumstances, officials said.