Daily Management Review

Christine Lagarde defines threats to world trade


Role of trade as a driver of global growth is threatened by slowing of trade reforms since the early 2000s and growth of protectionism after the financial crisis, says a joint document issued by the International Monetary Fund, the World Trade Organization and the World Bank, Reuters writes.

World Economic Forum
World Economic Forum
Presenting a joint report entitled "Making Trade an Engine of Growth for All" in Berlin, the organizations called on governments to study negative effects of global trade on industrial workers, jobs and communities, especially in advanced economies.

Recent data on the impact of competition in imports on manufacturing jobs at specific locations in Europe and the United States show how dramatic such effects can be in the absence of co-existing policies.

"The role of trade in the world economy is at a critical stage", the report says. The study’s authors are certain that the lack of reforms, which would make trade more profitable for broader segments of society, is hampering productivity and income growth.

In addition, Head of the International Monetary Fund (IMF) Christine Lagarde said that Germany should increase investment in education and broadband Internet access, and not only in infrastructure reconstruction, in order to reduce surplus of the current account.

"The surplus must be rebalanced, and there are several ways to do this". Some of our recommendations to non-politicians include increased investment in the German economy", Lagarde said.  

Lagarde presented a joint report on the world trade of the IMF, the World Bank and the World Trade Organization. She, World Bank President Jim Yong Kim and WTO Director-General Roberto Azevedo will later meet with German Chancellor Angela Merkel.

Lagarde said that global trade has some devastating effects, despite the fact that it is the main source of growth, adding that international trade should be supported, and reforms must be implemented to eliminate some of its negative consequences.

In January, the World Bank worsened the outlook for global economic growth in 2017 by 0.1 percentage points, to 2.7%. In the same month, the IMF left unchanged forecast for the world economy growth - 3.4% in 2017. Now, increasingly more experts are admitting the fact that growth will turn out to be better than forecasts by the end of the year.

However, analysts fear that the overall global recovery may slow down due to the growing populist activity in developed countries, in particular in the US, France and Italy.

In late April, the International Monetary Fund and the World Bank will meet in Washington to convene Heads of central banks and finance ministers from around the world. Probably, the meetings will also discuss decisions of the administration of new US President Donald Trump, concerning, for example, trade restrictions.

Trump’s administration has repeatedly said that they have all tools to change the situation: in particular, the introduction of protective tariffs on imports from China and even selective default on more than $ 1 trillion of American debt to China.

However, the world community can compensate for the effect of these threats. Tariffs will eventually be abolished by the World Trade Organization, and default on debt will be even more reckless and first of all will hit the United States itself. If Trump can persuade China to open its economy for export from the US, this will be an absolute victory. But if his plan is to unilaterally withdraw the US from international trade relations, the result is likely to hurt many ordinary American workers.  

source: reuters.com

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