Global finance chiefs urge trade war solution as Bali talks wrap

hong kong — Global finance chiefs used the closing sessions of talks in the tropical resort of Bali to hammer home the message that simmering trade tensions are already denting global growth and need to be resolved.

Bank of Japan Governor Haruhiko Kuroda said it’s essential to have dialogue on trade; Brazil’s central bank President Ilan Goldfajn flagged the tensions as one of the biggest threats to emerging economies; Bank for International Settlements General Manager Agustin Carstens said there’s a risk the global economy goes backwards due to rising protectionism.

While People’s Bank of China Governor Yi Gang called for a constructive solution to the dispute — he added that China is preparing for the worst. “You see a lot of people in China now preparing for this trade tension to be a prolonged situation,” Yi said during a panel discussion hosted by the Group of Thirty, a consultative group on international economics. “The downside risks from trade tensions are significant.”

The Chinese official received support from the floor when Mexico’s former president Ernesto Zedillo took an opportunity during a ques-

tion-and-answer session to counsel Yi to follow the example set by Mexico and Canada during their Nafta negotiations with the US.

“Mexico and Canada made clear that they’d rather not have Nafta than having the deal that the US wanted. In the end, Mexico and Canada got their way in every single issue that had been drawn as a red line,” Zedillo said. “So I hope China doesn’t blink.”

Policy makers also warned on the impact of rising interest rates and market volatility. Officials from emerging economies said the Federal Reserve’s ongoing push to raise interest rates was causing pain.

Indonesia’s central bank governor Perry Warjiyo, faced with a tumbling currency amid the rout in emerging markets, has called for global monetary policy to be better synchronised and a multilateral response to protectionist headwinds. Officials in Colombia and Mexico also warned of strains during the week’s meetings.

Still, Brazil’s Goldfajn said emerging markets “should not complain about normalisation” because the gradual moves will help prevent the need for sudden changes later on.

As officials left Bali, there was little prospect of any resolution to the USChina trade dispute in sight.

“We are moving from synchronized growth to economic divergence,” said Bank of France Governor Francois Villeroy de Galhau.