TRADE WARNING
Lagarde calls for countries to observe ‘level playing field’ as world economy picks up
While IMF head says global economy is gaining momentum, protectionism could stall progress,
WASHINGTON— The head of the International Monetary Fund said on Wednesday that after six years of disappointing growth, the world economy is finally gaining momentum. But she warned of potential threats, from political uncertainty in Europe to protectionism, that could hinder trade.
Christine Lagarde, the IMF’s managing director, said there is a critical need for more international co-oper- ation. Restricting trade flows would be a “self-inflicted wound” that would harm workers and consumers, she said in a speech previewing next week’s meetings in Washington of the 189-nation IMF and its sister lending organization, the World Bank.
In the speech in Brussels, Lagarde did not single out any country for criticism on the issue of protectionism. In his campaign, U.S. President Donald Trump had vowed to impose punitive tariffs on goods from countries that he thinks harm American workers by flouting trade rules.
Trump has threatened to slap tariffs as high as 45 per cent on goods from China and Mexico unless those nations stop practices that he says violate trade laws.
Resorting to protectionism, Lagarde said, would disrupt supply chains for domestic companies and inflate prices that companies and consumers must pay. A better approach would be for countries — both those with trade surpluses and those with deficits — to co-operate in pursuing policies to address the imbalances.
“Co-operation means working together to ensure that countries observe a level playing field,” Lagarde said.
The Geneva-based World Trade Organization released a report Wednesday predicting that global trade will rebound this year and in 2018, after a lacklustre 2016. The WTO estimated that trade flows would increase 2.4 per cent this year, up from 1.3 per cent in 2016, which was the weakest figure since the height of the financial crisis in 2008.
Next week’s finance meetings will likely be dominated by debate over how the global financial system should respond to trade and other economic proposals being pushed by the new Trump administration. The United States will be represented at the discussions by Treasury Secretary Steven Mnuchin and Federal Reserve Chair Janet Yellen.
In her speech, Lagarde said next week’s meetings will occur at a time when prospects for the global economy are improving after struggling for six years to emerge from the severe downturn triggered by the worst financial crisis since the 1930s.
“After six years of disappointing growth, the world economy is gaining momentum as a cyclical recovery holds out the promise of more jobs, higher incomes and greater prosperity going forward,” Lagarde said.