Permalink to IMF governors vow to spur global trade
By Frank Fuhrig — The International Monetary Fund’s key steering committee is vowing to spur global trade and “resist all forms of protectionism” to restore lagging economic growth. The 25-country committee, which advises the Washington-based crisis-lender’s Board of Governors, said in a communique on Saturday during annual meetings that countries must “maintain economic openness and reinvigorate global trade as a critical means to boost global growth.”
Structural reforms, alongside monetary policies and government spending and investment to stimulate activity, are necessary, the committee said.
“The global economy has benefited tremendously from globalization and technological change,” the communique said.
“However, the outlook is increasingly threatened by inward-looking policies, including protectionism, and stalled reforms.”
The IMF this week left its global economic forecasts at 3.1 per cent growth for this year and 3.4 per cent in 2017, both unchanged from the previous update in July.
The IMF forecast GDP growth in advanced economies of about 1.7 per cent in 2016-17, while emerging markets and developing economies are projected to expand around 4.4 per cent as a group. Powerhouses India and China are still growing faster, while some low-income commodity producers are in recession due to a trough in prices for their exports.
Global trade growth, though, is projected by the World Trade Organization at 1.7 per cent, barely half the rate of economic growth. This year will be the first since 2001 that trade growth has fallen below the rate of economic expansion.
The slowdown in trade growth is due mostly to commodity prices and the global economy, but the IMF this week launched an unusually loud and direct attack on gathering political trends toward protectionism.
The IMF warned that impairing trade would only worsen economic performance.
Needed structural reforms vary across countries but “are key to raising potential growth,” the communique said. Such measures should ‘‘raise productivity and create opportunities for all, while assisting those who bear the burden of adjustment to globalization and technological change.”
Netherlands Finance Minister Jeroen Dijsselbloem, who presides over the Eurogroup of euro zone finance ministers, said that structural reforms and focused deregulation are “not only important for stimulating growth and to make our economies more resilient to shocks but also to preserve our social welfare states.”
Product market reforms, activating labour-market policies and reducing taxes on labour can “lead to lower unemployment, lower inequality and higher economic growth in the short run,” he told the IMF’s 189 member countries on Saturday.
Dijsselbloem cautioned that every economic event is not “a new potential worldwide economic crisis,” including Britain’s looming departure from the European Union.
“The effects until now have proven to be moderate, although the ultimate impact of the Brexit is very unclear, which indicates that the British, the European and the world economy are resilient,” he said.
British authorities have announced plans to start exit negotiations in March, and Dijsselbloem said markets and firms need clarity “as soon as possible on the exit process.”
Reviving world trade and combating protectionist measures “should remain high on the policy agenda” globally, he said.
Decided in a June referendum, Brexit will see a significant reduction in British economic integration with Europe.
Meanwhile, prospects for the Transatlantic Trade and Investment Partnership (TTIP), still in negotiation between the United States and the EU, are dimming in the face of opposition from left-wing demonstrators and politicians.
In the United States, both major-party presidential candidates oppose the Trans-Pacific Partnership (TPP) trade deal, which faces a vote this year in Congress, and have called for the 22-year-old North American Free Trade Agreement (NAFTA) with Canada and Mexico to be renegotiated or scrapped.
“We have to face up to the fact that globalization may have benefited some more than others, and governments have a role to play regarding those that are adversely affected by globalization,” Dijsselbloem said.
“Addressing the genuine concerns and just claims of the vulnerable might reduce support for anti-free trade movements.” — dpa