U.S. and China urged to end their dis­pute

Fi­nan­cial chief pro­vides a three-step so­lu­tion to prob­lems

The Standard (St. Catharines) - - Business -

NUSA DUA, IN­DONE­SIA — The heads of the World Bank and IMF ap­pealed Thurs­day to the U.S. and China to cool their dis­pute over tech­nol­ogy pol­icy and play by world trade rules, as tum­bling share prices drove home po­ten­tial per­ils from a clash be­tween the world’s two big­gest economies.

Global eco­nomic growth is slow­ing but re­mains strong, Chris­tine La­garde, man­ag­ing direc­tor of the In­ter­na­tional Mone­tary Fund, said on the side­lines of the IMF-World Bank an­nual meet­ing, be­ing held this week on the In­done­sian is­land of Bali.

Coun­tries are mostly in a “strong po­si­tion,” she said, “which is why we be­lieve we are not see­ing what is re­ferred to as ‘con­ta­gion.’”

But the gy­ra­tions that rocked Wall Street the day be­fore and Asia and Europe on Thurs­day, tak­ing the Shang­hai Com­pos­ite in­dex down 5.2 per cent and Ja­pan’s Nikkei 225 nearly 4 per cent, do partly re­flect ris­ing in­ter­est rates in the U.S. and some other coun­tries and grow­ing un­cer­tainty over trade, she said.

“It’s the com­bi­na­tion of the two that is prob­a­bly show­ing some of the ten­sions that we see in terms of in­dices, short-term in­di­ca­tors as well as pos­si­bly mar­ket vo­latil­ity,” La­garde said.

The U.S. and Chi­nese ex­changes of penalty tar­iffs in their dis­pute isn’t help­ing, she said. Her ad­vice was three­fold: “De-es­ca­late. Fix the sys­tem. Don’t break it.”

She ac­knowl­edged that the World Trade Or­ga­ni­za­tion, based in Geneva, has made scant head­way in re­cent years to­ward a global agree­ment on trade rules that can ad­dress is­sues like com­plaints over Chi­nese poli­cies U.S. Pres­i­dent Don­ald Trump says un­fairly ex­tract ad­vanced tech­nolo­gies and put for­eign com­pa­nies at a dis­ad­van­tage in a quest to dom­i­nate cer­tain in­dus­tries.

“Our strong rec­om­men­da­tion is to es­ca­late work for a world trade sys­tem that is stronger, that is fairer and is fit for the pur­pose,” she said in open­ing re­marks. Some­what obliquely, she said poli­cies aimed to­ward an ex­ces­sively “dom­i­nant po­si­tion” were not com­pat­i­ble with free and fair trade.

The IMF has down­graded its fore­cast for global eco­nomic growth to 3.7 per cent this year from its ear­lier es­ti­mate of 3.9 per cent. It also is­sued re­ports this week on gov­ern­ment fi­nance and fi­nan­cial sta­bil­ity that warn of the risks of dis­rup­tions to world trade.

World Bank Pres­i­dent Jim Yong Kim said the World Bank is work­ing with de­vel­op­ing coun­tries to brace for fur­ther de­te­ri­o­ra­tion.

“Trade is very crit­i­cal be­cause that is what has lifted peo­ple out of ex­treme poverty,” Kim said. “I am a glob­al­ist. That is my job. That is our only chance of end­ing ex­treme poverty. We need more trade not less trade,” he said.

Kim said the World Bank has launched a “hu­man cap­i­tal in­dex” to help rank coun­tries by the level of their in­vest­ments in such ar­eas as ed­u­ca­tion and health care.

Poli­cies to build such hu­man cap­i­tal are among the “smartest in­vest­ments coun­tries can make,” he said.

He praised host coun­try In­done­sia, a demo­cratic, Mus­lim­ma­jor­ity coun­try of 260 mil­lion, for fos­ter­ing strong growth but noted there was much room for im­prove­ment. The coun­try is ranked 87th of 150 coun­tries in the list.

The an­nual fi­nan­cial meet­ings take place at a time of grow­ing con­cern over trends other than trade, such as moves to raise bor­row­ing costs in the U.S. and some other re­gions to help cool growth and keep in­fla­tion in check. Ris­ing in­ter­est rates are draw­ing in­vest­ment flows out of emerg­ing mar­kets in Asia and Latin Amer­ica at a time when growth in their ex­ports is likely to slow.

Ar­gentina, Pak­istan, Venezuela and Zim­babwe are among coun­tries grap­pling with crises. Con­cerns are grow­ing, also, over slow­ing growth in China and ris­ing debts among some de­vel­op­ing coun­tries re­sult­ing from projects as­so­ci­ated with Bei­jing’s “Belt and Road Ini­tia­tive” to de­velop ports, roads and other in­fras­truc­ture.

La­garde said the IMF will send a team to Pak­istan in the com­ing weeks after a meet­ing with its fi­nance min­is­ter, Asad Umar, in which he re­quested emer­gency bailout loans.

The IMF chief did not say how much Umar had re­quested. An­a­lysts say Pak­istan is seek­ing $8 bil­lion in loans to deal with a bal­ance of pay­ments cri­sis. Pak­istan’s cur­rency plunged by around seven per cent ear­lier this week after word of the loan re­quest was made pub­lic.

Asked whether IMF help might amount to a “bailout” for Chi­nese loans, La­garde said any such help would have to be com­pletely trans­par­ent.

The an­nual sum­mit for global fi­nance brings to­gether cen­tral bankers and fi­nance min­is­ters, de­vel­op­ment ex­perts and civil so­ci­ety groups from across the globe.

Bali has suf­fered ter­ror­ist bomb­ings in the past, and the event was be­ing held amid tight se­cu­rity. A convoy of armed per­son­nel car­ri­ers was lined up along­side a beach path, and ac­cess to the area was tightly con­trolled. Still, about a dozen ac­tivists con­cerned with land grabs and other is­sues some­times as­so­ci­ated with World Bank-spon­sored projects staged a brief, peace­ful protest over the can­cel­la­tion by lo­cal au­thor­i­ties of a con­fer­ence they were to hold in the nearby city of Den­pasar.

“If they don’t want to ever hear our voices, what kinds of projects are we ex­pect­ing?” said Joan Sal­vador, a mem­ber of a Philip­pine women’s group.

GRA­HAM CROUCH THE AS­SO­CI­ATED PRESS

The gy­ra­tions that rocked Wall Street, Asia and Europe partly re­flect ris­ing in­ter­est rates in some coun­tries and grow­ing un­cer­tainty over trade.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.