TRADE WARN­ING

La­garde calls for coun­tries to ob­serve ‘level play­ing field’ as world econ­omy picks up

Toronto Star - - BUSINESS - MARTIN CRUTSINGER THE AS­SO­CI­ATED PRESS

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.

Re­strict­ing trade flows would be a “self-in­flicted wound,” IMF chief Chris­tine La­garde said.

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