Monday 22 January 2018

World finance leaders grapple with globalisation fears

World Bank president Jim Yong Kim confers with International Monetary Fund managing director Christine Lagarde during the World Bank/IMF spring meetings (AP)
World Bank president Jim Yong Kim confers with International Monetary Fund managing director Christine Lagarde during the World Bank/IMF spring meetings (AP)

Global finance leaders have dropped a sharp condemnation of trade protectionism and references to climate change from a closing statement at the spring meetings of the International Monetary Fund and the World Bank.

This year's meetings in Washington DC were dominated by a debate over how to respond to a rising tide of anti-globalisation sentiment evidenced in the United States by the election of Donald Trump.

Mr Trump pledged during last year's campaign that he would reduce America's huge trade deficits, which he blamed for the loss of millions of well-paid factory jobs.

In its communique, the 189-nation IMF urged nations to avoid "inward-looking policies", but it did not include tougher language it had used in an October statement in which it called on all countries to "resist all forms of protectionism".

The new statement also dropped any mention of the threat of climate change.

President Trump has threatened to impose punitive tariffs of up to 45% against Mexico, China and other nations he believes are competing unfairly with American workers. During his presidential campaign he called climate change a hoax.

At a closing news conference, IMF managing director Christine Lagarde and Agustin Carstens, head of the Bank of Mexico and chairman of the IMF's policy committee, sought to downplay the changes.

Ms Lagarde noted that strong language condemning protectionism and promoting efforts to combat climate change, while taken out of the communique, remained in a separate document setting out the IMF's policy agenda.

Mr Carstens said it was important on the issue of trade to recognise the viewpoints of different countries.

"We all want free and fair trade and that is what is reflected in the communique," he said when asked why the language on protectionism had been dropped.

A similar change on the issue of protectionism was made in a communique that the Group of 20 major economies issued last month in Baden-Baden, Germany.

Steven Mnuchin, attending his first international gathering as Mr Trump's treasury secretary, had defended the change in the G20 communique by saying: "The historical language was not really relevant."

Eswar Prasad, a trade economist at Cornell University, said the changes in the IMF and G-20 communiques showed the Trump administration's desire to signal that US policy will be different under a new president.

"The G-20 consensus on issues such as free trade and combating climate change is crumbling in the face of the Trump administration's hostility to those positions," he said.

"The notion of allowing for freer trade has run up against the Trump administration's conviction that its major trading partners are manipulating trade and currency policies to their own benefit."

At a joint appearance with Ms Lagade on Saturday, Mr Mnuchin said the internal debate over the wording of the IMF communique had taken much less time than the debate over the wording of the G-20 communique last month.

He said the administration's goal was to make trade more fair and was not aimed at erecting protectionist barriers.

"The United States is probably the most open trading market there is," he said.

Mr Mnuchin was also asked about the administration's tax plan, which Mr Trump said would be unveiled on Wednesday.

Mr Mnuchin said the administration's goal was to simplify the tax system for both individuals and businesses.

"We want to create a system where the average American can do their taxes on a postcard, not a book," he said.

"Maybe a big postcard, but you can still stick it in the mail."

He did not provide details of the plan, which Mr Trump said would provide a "massive" tax cut for Americans.

Throughout his presidential campaign last year, Mr Trump pointed to closed factories around America and said they represented a failure of past presidents to be tough enough in negotiating trade agreements to protect US jobs.

Since taking office he has pulled the United States out of a 12-nation Pacific trade agreement negotiated by the Obama administration and just this week ordered the Commerce Department to speed up an investigation into whether steel imports posed a national security threat.

His action could lead to higher tariffs on steel imports.

The spring IMF and World Bank meetings took place against the backdrop of an improving global economy, helped by better performances in the United States and China, the world's two biggest economies, and in a rise in commodity prices which has helped many developing nations.

The IMF's latest economic forecast projects global growth of 3.5% this year, which would be the fastest pace in five years and up from 3.1% last year.


Press Association

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