La­garde urges bal­ance between growth, trade

China Daily (Canada) - - FRONT PAGE - By CHEN WEIHUA in Wash­ing­ton chen­wei­hua@chi­nadai­lyusa. com

In­ter­na­tional Mone­tary Fund (IMF) Man­ag­ing Direc­tor Chris­tine La­garde called for global ef­forts to boost growth while guard­ing against pro­tec­tion­ism.

She was speak­ing on Wed­nes­day morn­ing at the Kel­logg School of Man­age­ment at the North­west­ern Uni­ver­sity out­side Chicago on the health of the global econ­omy.

The fifth most pow­er­ful woman in the world, ac­cord­ing to Forbes mag­a­zine, talked about the fast change in the world over the past two decades, cit­ing the fact that the emerg­ing and de­vel­op­ing coun­tries, home to 85 per­cent of the world’s pop­u­la­tion, have wit­nessed more progress for more peo­ple than at any time in his­tory, from life ex­pectancy to school en­roll­ment.

“A good deal of this de­vel­op­ment is due to the suc­cess of China, but there has been a broader trend of eco­nomic con­ver­gence between the poor and the rich na­tions — not as fast as it should be, but a trend nev­er­the­less,” she said.

La­garde de­scribed the prospects of the emerg­ing and de­vel­op­ing economies as mer­it­ing some “guarded op­ti­mism”, say­ing these coun­tries will con­tinue to con­trib­ute more than three-quar­ters of to­tal global growth this year and next af­ter driv­ing the global re­cov­ery since the 2008 fi­nan­cial cri­sis.

“China is rightly re­bal­anc­ing from man­u­fac­tur­ing to ser­vices, from in­vest­ment to con­sump­tion, and from ex­ports to do­mes­tic ser­vices — which should pro­duce a more sus­tain­able, al­beit slower growing eco­nomic model. Even so, it will con­tinue to grow at a ro­bust rate of about 6 per­cent,” she said.

The words are likely to of­fer some as­sur­ance about the Chi­nese econ­omy, where the Bank for In­ter­na­tional Set­tle­ments, an in­ter­na­tional watch­dog, warned last week about a cri­sis in the bank­ing sys­tem due to the ex­cesses in credit.

La­garde said the US econ­omy has been re­cov­er­ing for some time but had a set­back in the first half of 2016, which will lead to a down­grade in the IMF’s US forecast.

She said there are good rea­sons to be op­ti­mistic about the future. “And yet, the mood in an im­por­tant part of the world — the one we call the ad­vanced economies — has shifted in the op­po­site di­rec­tion,” said La­garde, who started her sec­ond five-year term in July.

She ac­knowl­edged the ris­ing eco­nomic in­equal­ity in many coun­tries and the fact that real in­comes for many in the ad­vanced world have been de­clin­ing, say­ing it means that gov­ern­ments must work harder to make growth in­clu­sive.

“Of course, the so­lu­tion to mak­ing peo­ple bet­ter off is not to fall back on pro­tec­tion­ism or other failed eco­nomic recipes of the past,” she said. with­out say­ing if she means the strong pro­tec­tion­ism and anti-trade sen­ti­ment in the US and some Euro­pean coun­tries.

US pres­i­den­tial can­di­dates Don­ald Trump and Hil­lary Clin­ton both re­it­er­ated their op­po­si­tion to the Trans-Pa­cific Part­ner­ship (TPP) among the US and 11 Pa­cific Rim na­tions dur­ing their first de­bate on Mon­day.

US Sec­re­tary of State John Kerry ar­gued for the TPP on Wed­nes­day at the Wil­son Cen­ter. His ar­gu­ment fo­cused mostly on the geopo­lit­i­cal and na­tional se­cu­rity as­pects rather than ad­dress­ing the wide­spread con­cerns about how the fed­eral govern­ment will help work­ers and com­mu­ni­ties hurt by trade deals.

Kerry’s talk was one of the many given by top US of­fi­cials these days to make a last-ditch ef­fort to lobby the Congress to rat­ify the TPP dur­ing the lame-duck ses­sion later this year. The prospect for pas­sage has been re­garded by most trade ex­perts as a long shot.

The Coun­cil on For­eign Re­la­tions (CFR) pub­lished a re­port ti­tled A Win­ning Trade Pol­icy for the United States on Tues­day.

Ed­ward Alden, se­nior fel­low at the CFR and coau­thor of the pa­per, said the re­port rec­om­mends that Congress put in place a pro­gram of “liveli­hood in­sur­ance” to help es­tab­lished work­ers who have lost their jobs or suf­fered a se­ri­ous loss in in­come due to changes brought about by trade, tech­nol­ogy, or sim­ply by chang­ing con­sumer pref­er­ences.

La­garde called on na­tions to main­tain eco­nomic open­ness and to do no harm to the still frag­ile global econ­omy.

“Re­strict­ing trade and lim­it­ing eco­nomic open­ness is sure to worsen the growth out­look for the world and es­pe­cially its weak­est ci­ti­zens. But we need to re­think fun­da­men­tally how growth can be made more in­clu­sive, and act ac­cord­ingly,” she said.

She also urged na­tions to use mone­tary, fis­cal and struc­tural poli­cies in con­cert.

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