G-20 leaders should avoid ‘myopic’ trade policies: IMF
‘Efforts needed to strengthen global economic recovery’
WASHINGTON: The International Monetary Fund (IMF) on Wednesday urged leaders of the Group of 20 (G-20) major economies to avoid “myopic” nationalistic policies and to work together in agreed forums to resolve their trade and economic differences.
In a pointed message before US President Donald Trump’s first G-20 summit in Hamburg, Germany later this week, the IMF said in an economic briefing note to the leaders that a rules-based and open trading system was vital for world prosperity.
“Myopic pursuit of zero-sum policies can only end by hurting all countries, as history shows,” the IMF said. “Because national policies inevitably interact in a number of vital areas, creating strong spillovers across countries, the world economy works far better for all when policymakers engage in regular dialogue and work within agreed mechanisms to resolve disagreement.”
The IMF’s pitch to maintain multilateral cooperation comes as the Trump administration is considering imposing broad new steel tariffs or quotas based on national security grounds, a move that has not occurred since the World Trade Organization (WTO) was launched in 1995.
The US Commerce Department is expected to wait until after the G-20 summit this Friday and Saturday to issue its review of the steel industry’s national security implications, part of an effort to persuade China and other countries to cut excess capacity in the sector.
It is working on a similar report on the US aluminum industry, also invoking provisions of a 1962 US trade law.
The IMF also said that while the global economic recovery remains on track, with growth this year and next year in the 3.5 percent range, its forecasts do not include a major trade disruption.
However, “it should be cautious optimism that prevails — policy efforts are still needed to strengthen the recovery and build more inclusive economies,” IMF Managing Director Lagarde said in a blog post.
In her comments on the report the IMF prepared for the G-20, Lagarde urged action to address issues such as high corporate debt in emerging market economies, especially China, low productivity growth, and US policy uncertainty.
“Left alone, this constellation of concerns could be a recipe for sudden financial distress, when the world’s economies also continue to struggle with several longer-term problems,” she said.
Adding to concerns about aging populations and growing economic inequality, these “challenges put a ceiling on potential growth, making it harder to raise incomes and living standards.”
The IMF “Surveillance Note” said while the risks to the global economy in the short term are more balanced, “downside risks still dominate in the medium term.”
“There is no time for standing still,” the IMF said. “Policymakers will have to take tangible policy action to strengthen and sustain the recovery while ensuring that it is resilient, well-balanced and more inclusive.”
The comments echo themes raised frequently in the fund’s regular World Economic Outlook report, including the most recent quarterly update in April, which flagged the risk posed by policy uncertainty in the US and elsewhere.