Global economic woes and trade conflicts loom large over G-20 finance ministers' meeting in Bali

Group of 20 (G-20) finance ministers and central bank governors are meeting in Bali on Thursday (Oct 11) to discuss the challenges facing the global economy and the current threat of trade wars.

"My message to my fellow G-20 finance ministers will be that free trade equals more jobs, free trade equals more investment and free trade means higher economic growth" said Australia's Treasurer Josh Frydenberg, who met his Japanese counterparts to coordinate positions on the eve of the meeting.

But although the discussions in Bali will be extensive and will subsequently extend to the International Monetary Fund (IMF) and the World Bank, no respite from current trade confrontations is expected.

If anything, US Treasury Secretary Steven Mnuchin added to existing tensions by warning that Washington is "watching China carefully" and is prepared to respond to any indication of a Chinese currency "competitive devaluation" against the US dollar.

With the US economy continuing to grow strongly - American unemployment is now at its lowest in half a century - and European countries also putting up a good performance, momentum in the global economy remains strong.

Nevertheless, IMF managing director Christine Lagarde has indicated that the fund's hitherto optimistic forecasts about the future of the global economy - scheduled to be released in Bali - will be revised downward.

Of immediate concern is the future of the emerging economies, and particularly of big countries such as Turkey and Argentina, both of which are facing serious financial problems. It is telling that the head of the Central Bank of Argentina decided to stay at home in order to deal with his country's crisis, and only sent a deputy to Bali.

Still, Mr Nicolas Dujovne, Argentina's embattled finance minister, hopes to put the finishing touches in Bali to a bailout package worth US$57 billion (S$78.8 billion) at a time when the IMF projects that his country's economy will contract by a whopping 2.6 per cent by the end of this year, and another 1.6 per cent in 2019.

And Turkey, whose currency has fallen by over 40 per cent since the start of this year, is in equal difficulties.

"The challenges that Turkey faces will require a comprehensive policy package comprising monetary, fiscal, quasi-fiscal, and financial sector policies", the IMF said on Wednesday in a clear rebuke to Turkish President Tayyip Erdogan, who continues to claim that the pressures on his country are purely political, and originate from the US.

Nevertheless, and while evidence of the impact of a trade war on economic momentum is, as yet, hard to detect, trade frictions remain the biggest preoccupation in Bali.

In an interview with the Financial Times, Mr Mnuchin struck an optimistic note, citing the new US-Mexico-Canada trade deal signed last week, as well as the revised trade agreement with South Korea and the ongoing trade talks with the European Union and Japan as indications that US President Donald Trump's administration remains pledged to multilateral accords.

But Mr Mnuchin omitted mentioning the fact that all these deals recently concluded by the US, as well as the trade negotiations currently conducted with Japan and the EU contain new and special provisions which require America's key trading partners to tell Washington in advance of any trade negotiation they may be conducting with China.

In effect, this tightens the pressure the US exerts on China, and is designed to deepen Beijing's isolation.

Still, some positive steps are also expected from Bali. Contrary to perceptions that the Trump administration is turning its back on multilateralism and is determined to dismantle existing international institutions, Washington has actually been very supportive of the IMF.

Mr Trump was a strong advocate of the bailout package for Argentina, and US Treasury Secretary Mnuchin, representing the IMF's biggest single contributor, is expected to be constructive in discussions on Thursday about enlarging the sums available to the IMF to deal with international financial crises.

The IMF currently has about US$1 trillion in permanent reserves available for lending, but more than half of this allocation - which comes in the form of pledges by contributing states - will expire by 2022, so the pledges now need to be renewed. Yet Ms Lagarde hopes not merely to reinstate current reserves, but actually increase them.

No final decision will be reached in Bali this week, but the meeting will be an opportunity to sound the position of contributing nations. And all the indications are that, provided the Europeans undertake that in any future financial crisis on their continent they will look after their own affairs without resorting to the IMF, the US would consent to the IMF obtaining more financial firepower.

In short, the Bali meeting may just succeed in keeping the current multilateral trade and financial arrangements afloat. Although they are all hanging by a thread.