Thu, Apr 12, 2018 - Page 10 News List

Lagarde warns against protectionism

‘DIVISION OF LABOR’:The IMF head dismissed the argument of deficits as a sign of unfair trade practices, saying that they show nations’ varying economic contributions


IMF managing director Christine Lagarde speaks at an event held by the University of Hong Kong’s Asia Global Institute yesterday.

Photo: AFP

IMF managing director Christine Lagarde yesterday issued a stern warning to governments to avoid undermining global growth with protectionist trade policies.

In a less-than-thinly veiled warning to US President Donald Trump, who has locked horns with China on trade, the head of the IMF said countries should open trade further by reforming their own domestic practices rather than putting up new barriers to trade.

She said that it was a mistake to view trade deficits as a sign of unfair trade practices — as the US president has repeatedly claimed, most notably in the current dispute with China.

Trump last month imposed steep tariffs on steel and aluminum imports to the US, and announced pending tariffs on US$50 billion in Chinese goods in retaliation for alleged theft of intellectual property.

Since then, Washington and Beijing have escalated threats of new import duties, raising the real risk of an all-out trade war.

Governments “need to steer clear of protectionism in all its forms,” Lagarde said. “Remember: The multilateral trade system has transformed our world over the past generation. It helped reduce by half the proportion of the global population living in extreme poverty.”

In a speech previewing the issues to be discussed when world finance ministers and central bankers gather in Washington next week for the IMF and World Bank spring meetings, Lagarde said free trade “has created millions of new jobs with higher wages.”

“But that system of rules and shared responsibility is now in danger of being torn apart,” she said. “This would be an inexcusable, collective policy failure.”

Experience showed protectionist “import restrictions hurt everyone, especially poorer consumers,” by making products more expensive, Lagarde said.

She added that barriers “also prevent trade from playing its essential role in boosting productivity,” something the IMF has repeatedly said advanced economies need to improve in order to improve potential economic growth rates.

Governments should work to “reduce trade barriers and resolve disagreements without using exceptional measures,” and should directly help those facing upheaval, whether from trade or new technology, by improving investment in training and education, she added.

Lagarde also dismissed the argument — made by Trump and his trade advisers — that the presence of a trade deficit is a sign of unfair trade practices.

In fact, “these bilateral imbalances are a snapshot of the division of labor across economies,” she said.

The IMF next week will release its updated World Economic Outlook with forecasts of global growth, but despite the “darker clouds looming,” Lagarde said the world economy was seeing an upswing and “we continue to be optimistic.”

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