World Bank, IMF heads urge US, China to play by trade rules

The Myanmar Times - Weekend - - Business | International -

THE heads of the World Bank and IMF on Thurs­day urged the U.S. and China to play by world trade rules and de-es­ca­late a dis­pute over Bei­jing’s tech­nol­ogy de­vel­op­ment strat­egy that threatens to do last­ing dam­age to the global econ­omy.

Chris­tine La­garde, manag­ing di­rec­tor of the In­ter­na­tional Mone­tary Fund, said she would ad­vise Bei­jing and Wash­ing­ton to cool down, fix as­pects of the world trad­ing sys­tem that need fix­ing and “don’t break it.”

La­garde and World Bank Pres­i­dent Jim Yong Kim spoke sep­a­rately on the side­lines of the lenders’ an­nual meet­ing in a re­sort zone of the trop­i­cal In­done­sian is­land of Bali. The event brings to­gether fi­nance min­is­ters and cen­tral bankers from many economies, amid tight se­cu­rity: a line of armed per­son­nel car­ri­ers were lined up along­side a beach path and ac­cess to the area was tightly con­trolled.

Asked about the es­ca­lat­ing dis­pute be­tween the U.S. and China, La­garde said that so far there had been no “con­ta­gion” of ma­jor dam­age from penalty tar­iffs im­posed by the two coun­tries on each other’s ex­ports, but that they do risk hurt­ing “in­no­cent by­standers.”

La­garde said her ad­vice was in three parts: “De-es­ca­late. Fix the sys­tem. Don’t break it.”

The rules-mak­ing World Trade Or­ga­ni­za­tion, based in Geneva, has ways of ad­dress­ing U.S. com­plaints that China’s poli­cies un­fairly ex­tract ad­vanced tech­nolo­gies and put for­eign com­pa­nies at a dis­ad­van­tage in its push to dom­i­nate cer­tain in­dus­tries, she said. But she added that the WTO does need to work on ad­dress­ing is­sues like sub­si­dies.

“Our strong rec­om­men­da­tion is to es­ca­late work for a world trade sys­tem that is stronger, that is fairer and is fit for the pur­pose,” she said in open­ing re­marks.

La­garde also, some­what obliquely, said poli­cies aimed to­ward an ex­ces­sively “dom­i­nant po­si­tion” were not com­pat­i­ble with free and fair trade.

Ear­lier in the week, the IMF down­graded its global eco­nomic out­look, fore­cast­ing growth will be 3.7 per­cent this year rather than its ear­lier es­ti­mate for 3.9 per­cent growth. It also is­sued re­ports on gov­ern­ment fi­nance and fi­nan­cial sta­bil­ity that warn of the risks of dis­rup­tions to world trade.

Kim said the World Bank was work­ing with de­vel­op­ing coun­tries to pre­pare for a fur­ther de­te­ri­o­ra­tion. If tar­iffs were im­posed to their most ex­treme lim­its there would be a “clear slow­down and the im­pact on the de­vel­op­ing coun­tries would be greater,” he said.

“Trade is very crit­i­cal be­cause that is what has lifted peo­ple out of ex­treme poverty.

“I am a glob­al­ist. That is my job. That is our only chance of end­ing ex­treme poverty. We need more trade not less trade,” he said.

Kim said the bank had of­fered help to In­done­sia for its re­cent earth­quake and tsunami and other dis­as­ters. The peo­ple gath­ered in Bali for the meet­ings got a taste of such haz­ards them­selves with an overnight earth­quake that shook ho­tels in the re­sort area cor­doned off for the event. In­done­sian of­fi­cials said the worst dam­age oc­curred on Java is­land. There was no ev­i­dence of se­vere dam­age in the area near the fi­nance meet­ings.

Bali, a pop­u­lar tourist des­ti­na­tion, re­flects both the pos­i­tive and neg­a­tive as­pects of In­done­sia’s own rapid de­vel­op­ment over the past three decades — La­garde praised the demo­cratic, Mus­lim-ma­jor­ity coun­try of 260 mil­lion for mak­ing huge progress in im­prov­ing its fi­nances and fos­ter­ing strong growth.

But the byprod­ucts of the tourist boom in largely Hindu Bali have been sig­nif­i­cant in­equal­ity and en­vi­ron­men­tal dam­age.

The an­nual meet­ings take place at a time of grow­ing con­cern over trends other than trade, such as moves to raise bor­row­ing costs in the U.S. and some other re­gions to help cool growth and keep in­fla­tion in check. Ris­ing in­ter­est rates are draw­ing in­vest­ment flows out of emerg­ing mar­kets in Asia and Latin Amer­ica at a time when growth in their ex­ports is likely to slow.

Ar­gentina and Pak­istan are among coun­tries grap­pling with po­ten­tially desta­bi­liz­ing fi­nan­cial woes. Con­cerns are grow­ing, also, over slow­ing growth in China and ris­ing debts among some de­vel­op­ing coun­tries re­sult­ing from projects as­so­ci­ated with Bei­jing’s “Belt and Road Ini­tia­tive” to de­velop ports, roads and other in­fras­truc­ture.

On Mon­day, Pak­istan Fi­nance Min­is­ter Asad Umar said the coun­try would seek a bailout loan from the IMF to ad­dress its mount­ing bal­ance of payments cri­sis.

Asked about whether such help might amount to a “bailout” for Chi­nese loans, La­garde said she had not yet seen a for­mal re­quest for help but thought she might re­ceive one later in the day when meet­ing with Umar. Any such help would have to be com­pletely “trans­par­ent,” she added.

“In what­ever work we do we need a com­plete un­der­stand­ing and com­plete trans­parency about the na­ture of a debt that is bear­ing on a coun­try,” she said. Lead­ers of South­east Asian na­tions were also gath­er­ing in Bali for fi­nance-re­lated meet­ings, as fi­nance min­is­ters of the Group of 20 in­dus­trial na­tions and of­fi­cials from the Group of 24 de­vel­op­ing economies. The meet­ings in­clude side­line events staged by non-gov­ern­men­tal or­ga­ni­za­tions.

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