World finance leaders have defended globalisation against an assault from President Donald Trump and European populists. They argued that blocking free trade would hobble economic growth instead of saving jobs from foreign competition.
World Bank President Jim Yong Kim told journalists that freer trade and more openness were “critical for the future of the world.”
Christine Lagarde, the managing director of the International Monetary Fund, said that the answer to the wave of populism gaining support in many countries was to work for “more growth and better growth” in the world economy.
Lagarde and Kim spoke at the opening of three days of discussions among global finance leaders representing the 189 countries that are members of the IMF and its sister lending organisation, the World Bank.
The spring meetings, which will also include discussions today among finance ministers and central bank leaders from the Group of 20 major economic powers, were likely to be dominated by talk over the Trump administration's efforts to reduce America's huge trade deficits, which Trump during the presidential campaign blamed for the loss of millions of good-paying factory jobs.
The United States will be represented at the meetings by Treasury Secretary Steven Mnuchin and Federal Reserve Chair Janet Yellen.
Trump tapped into a rising backlash against free trade during the campaign, pledging that he would impose punitive tariffs of up to 45 per cent on countries such as China and Mexico which he blamed for pursuing unfair trade practises that were hurting American workers. While he had said that he would brand China a currency manipulator immediately on taking office, the administration sent Congress a report last week that found China was not manipulating its currency.
The Treasury report did put China and five other nations including Japan and Germany on a “monitoring list” which will subject them to increased consultations aimed at lowering their large trade surpluses with the United States.
The anti-globalisation backlash has also shown up in Europe, playing a factor in last summer's vote in Britain to exit the European Union, and also in the election campaigns in other countries including this Sunday's vote for president in France.
Mnuchin spoke yesterday at a conference sponsored by the Institute of International Finance, an organisation representing the world's biggest banks. He said that the Trump administration's view was that “what is good for the US economy is good for the global economy” because stronger growth in the United States will have a spillover effect for other nations.
German Finance Minister Wolfgang Schaeuble, speaking to a different Washington audience yesterday, conceded that free trade was currently under attack in ways that could end up being harmful such as Britain's move to leave the 28-nation European Union, a process that has been dubbed Brexit.
“For both sides this is not a good situation. It's something like a lose-lose situation, not a win-win situation,” Schaeuble said. “It must be clear that the rest of Europe stands together.”
To lift the US economy to growth of 3 per cent or higher, up from the 2 per cent rates seen in recent years, Mnuchin said the administration was focused on getting tax reform through Congress and also getting rid of unnecessary regulations.
Mnuchin said the administration's tax plan would be released “very soon.” While Mnuchin had set a goal of getting it passed by the August recess of Congress, that goal has slipped. But he said that the administration still hoped to get a measure through Congress well before the end of the year.
Mnuchin is also working on proposals to overhaul the regulations put in place by the Dodd-Frank Act passed in the wake of the 2008 financial crisis. He said he would have a report with recommendations to present to the president by June that would address “the major issues” in the drive to revamp the Dodd-Frank law.
Trump has backed away from some of his campaign threats on trade. But yesterday, he ordered the Commerce Department to speed up an investigation into whether steel imports jeopardise US national security a move that could lead to tariffs on imported steel from countries such as Canada, Brazil and South Korea.
Lagarde said that the IMF and its member nations needed to “protect free, fair and global trade.” In an interview yesterday with CNBC, Lagarde said that the goal of all nations should be to promote a level playing field in trade.
In his World Bank news conference, Kim said a recent study showed that of all the job losses that have hit industrial countries in recent years, at most only 20 per cent could be blamed on increased trade competition. He said the biggest factor in the job losses was increased automation.
“My message is you're not going to bring these old jobs back,” Kim said. “Every country in the world has to think about how it's going to compete in the economy of the future.”