WASHINGTON: World finance officials believe that the answer to growing attacks on globalisation is not to erect new trade barriers but to do a better job of protecting workers who are harmed by free trade.
The finance officials are concluding three days of talks Saturday with sessions of the policy-making bodies of the 189-nation International Monetary Fund and its sister lending organisation, the World Bank.
The meetings are coming at a time when there is a sizeable antiglobalisation backlash following a June vote in Britain to leave the European Union and the presidential campaign of Republican nominee Donald Trump, who has focused on his complaints about illegal immigration and America’s huge trade deficits.
Trump has threatened to impose punitive tariffs on countries like China and Mexico that he feels are pursuing unfair trade practices and costing millions of American jobs.
But officials at these meetings say that a decades-long effort to tear down trade barriers has lifted millions of people in poor nations out of poverty. They say the problem is that not enough has been done to protect workers who have lost jobs because of the greater competition from developing countries.
“If we really want jobs and higher income, if we care about poverty reduction and economic fairness ... if we care about growth, then we need to be serious about fostering global trade and about making sure that global trade works for all,” IMF Managing Director Christine Lagarde said Friday.
World Bank President Jim Yong Kim agreed that at present there is “tremendous anger against trade,” but he said that critics do not understand how important the growth of world trade has been in lifting people out of extreme poverty.
“We are here because we believe in our mission of ending extreme poverty,” Kim said. “We are not going to do it without more robust trade.”
Before the IMF and World Bank meetings, finance ministers and central bank governors of the Group of 20 major economies renewed a pledge to utilise all the policy tools at their disposal to combat what has been an anaemic global recovery from the Great Recession triggered by the 2008 financial crisis.
The G20 officials acknowledged they are confronting a broad range of new risks ranging from the antitrade backlash to lingering worries in financial markets over whether Britain’s exit from the EU could further drag down growth and possible trigger a new worldwide downturn.
Chinese Finance Minister Lou Jiwei, the chairman of the G20 finance group, said Friday that the global situation “remains challenging and complicated” with growth in many nations still too slow despite years of aggressive monetary policies by the Federal Reserve and other central banks.
“Geopolitical tensions are growing, terrorist attacks are frequent ... all of these factors have major implications on the international economic and financial markets,” Lou told reporters.
The G20 includes traditional economic powers such as the United States, Germany and Japan and emerging economies such as China, Brazil and India. Treasury Secretary Jacob Lew and Federal Reserve Chair Janet Yellen represented the United States.
Lew told reporters after the G20 discussions that he was encouraged that there was growing support among other nations that more tools needed to be employed beyond monetary policy to boost weak global growth.
The concerns about financial markets were highlighted earlier Friday when the British pound plunged sharply, sliding 6 per cent in just a couple of minutes to its lowest level in more than three decades, before rebounding.
British Treasury chief Philip Hammond, in Washington for the finance meetings, said the plunge was the result of a growing realisation of investors that Britain is proceeding with plans to leave the EU. Markets have also been roiled in recent days by worries about the health of Germany’s largest bank, Deutsche Bank.
German Finance Minister Wolfgang Schaeuble refused to address questions about Deutsche Bank’s future, but he noted that global financial markets rebounded this summer after initially falling sharply following the June vote by Britain to leave the EU. He credited the market resilience to the financial reforms put in place following the 2008 financial crisis.
“The experience and results of Brexit have shown that we have already made the globe more resilient,” Schaeuble said.
Lew also refused to discuss Deutsche Bank specifically, but he said with regard to all Europeans banks, US officials have made the point for some time that it was important for financial institutions to have adequate capital buffers. “We have been clear that Europe has not done as much as the United States,” Lew said.
