Global trade rules need fixing
nusa dua (Indonesia) — International Monetary Fund managing director Christine Lagarde on Thursday warned countries against engaging in trade and currency wars that hurt global growth and imperil “innocent bystanders”.
Formally launching the IMF and World Bank annual meetings on the Indonesian resort island of Bali, Lagarde urged countries to “deescalate” trade conflicts and fix global trading rules instead of abandoning them.
The United States and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other’s goods over the past few months, rattling financial mar- kets as investors worry that the es- calating trade conflict could knock global trade and investment.
The tariffs stem from the Trump administration’s demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a $375 billion US goods trade surplus.
“We certainly hope we don’t move in either direction of a trade war or a currency war. It will be detrimental on both accounts for all participants,” Lagarde told a news conference. “And there would also be lots of innocent bystanders,” including countries that supply commodities and components to China, such as Indonesia.
She also defended central bank rate hikes in a veiled rebuke to Donald Trump after the US president blamed “crazy” Fed policies for contributing to financial market turmoil.
Lagarde said central bank rate increases such as those by the policy-setting US Federal Reserve were justified by fundamentals — as several central bankers pointed to their need for independence.
“It is clearly a necessary development for those economies that are showing much improved growth, inflation that is picking up... unemployment that is extremely low,” Lagarde told a Press briefing in Bali.
“It’s inevitable that central banks make the decisions that they make.”
Finance ministers for developing nations in the Group of 24 whose economies have been battered by stormy markets urged major economies to reform the global trading system, rather than discard it.
The G24 statement, issued on the sidelines of the meetings, said all emerging markets were “adversely affected” by excessive capital flow volatility. —