Washington and Beijing destroy global trading system
The heads of the World Bank and IMF on Thursday urged the United States and China to play by world trade rules and de-escalate a dispute over Beijing’s technology development strategy that threatens to do lasting damage to the global economy. As The Japan News writes in the article World Bank, IMF urge U.S., China to play by trade rules, Christine Lagarde, managing director of the International Monetary Fund, said she would advise Beijing and Washington to cool down, fix aspects of the world trading system that need fixing and “don’t break it.”
Lagarde and World Bank President Jim Yong Kim spoke separately on the sidelines of the lenders’ annual meeting in a resort zone of the tropical Indonesian island of Bali. The event brings together finance ministers and central bankers from many economies, amid tight security: a line of armed personnel carriers were lined up alongside a beach path and access to the area was tightly controlled.
Asked about the escalating dispute between the U.S. and China, Lagarde said that so far there had been no “contagion” of major damage from penalty tariffs imposed by the two countries on each other’s exports, but that they do risk hurting “innocent bystanders.”
The rules-making World Trade Organization, based in Geneva, has ways of addressing U.S. complaints that China’s policies unfairly extract advanced technologies and put foreign companies at a disadvantage in its push to dominate certain industries, she said. But she added that the WTO does need to work on addressing issues like subsidies.
“Our strong recommendation is to escalate work for a world trade system that is stronger, that is fairer and is fit for the purpose,” she said in opening remarks. Lagarde also, somewhat obliquely, said policies aimed toward an excessively “dominant position” were not compatible with free and fair trade.
Earlier in the week, the IMF downgraded its global economic outlook, forecasting growth will be 3.7 percent this year rather than its earlier estimate for 3.9 percent growth. It also issued reports on government finance and financial stability that warn of the risks of disruptions to world trade.
Jim Yong Kim said the World Bank was working with developing countries to prepare for a further deterioration. If tariffs were imposed to their most extreme limits there would be a “clear slowdown and the impact on the developing countries would be greater,” he said. “Trade is very critical because that is what has lifted people out of extreme poverty. “I am a globalist. That is my job. That is our only chance of ending extreme poverty. We need more trade not less trade,” he said.
Kim said the bank had offered help to Indonesia for its recent earthquake and tsunami and other disasters. The people gathered in Bali for the meetings got a taste of such hazards themselves with an overnight earthquake that shook hotels in the resort area cordoned off for the event. Indonesian officials said the worst damage occurred on Java island. There was no evidence of severe damage in the area near the finance meetings.
Bali, a popular tourist destination, reflects both the positive and negative aspects of Indonesia’s own rapid development over the past three decades — Lagarde praised the democratic, Muslim-majority country of 260 million for making huge progress in improving its finances and fostering strong growth. But the byproducts of the tourist boom in largely Hindu Bali have been significant inequality and environmental damage.
The annual meetings take place at a time of growing concern over trends other than trade, such as moves to raise borrowing costs in the U.S. and some other regions to help cool growth and keep inflation in check. Rising interest rates are drawing investment flows out of emerging markets in Asia and Latin America at a time when growth in their exports is likely to slow.