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The IMF espouses a policy of free and open trade, in part to lift up emerging and developing countries and promote solid overall growth  in a world in which nations are increasingly interdependent. The picture shows IMF headquarters in Washington D.C.
The IMF espouses a policy of free and open trade, in part to lift up emerging and developing countries and promote solid overall growth  in a world in which nations are increasingly interdependent. The picture shows IMF headquarters in Washington D.C.

Finance Officials Face Shadow of Anti-Globalism

The movement toward nationalism has gained traction just as the global economy finally seems to be picking up in earnest

Finance Officials Face Shadow of Anti-Globalism

As finance ministers and central bankers from 189 countries converge on Washington this week for the International Monetary Fund’s semiannual meetings, the group faces a wave of anti-globalism from the US and other large members that threaten to undercut its very mission.
Experts say the shift toward populism and nationalism—underscored by President Trump’s election and the United Kingdom’s vote to leave the European Union—is likely to dominate discussions at the meetings of the IMF and World Bank, which formally begin Friday, USA Today online reported.
“This move toward a retreat to nationalist policies cuts right at the heart of the IMF’s mission of promoting multilateralism and global cooperation,” said Eswar Prasad, a professor of trade policy at Cornell University and former head of the IMF’s China division.
The IMF provides loans to financially struggling countries and works to ensure global financial stability, while the World Bank assists poor and developing nations.
The movement toward nationalism has gained traction just as the global economy finally seems to be picking up in earnest. For years after the 2008 financial crisis and recession, IMF Managing Director Christine Lagarde bemoaned an “uneven” global recovery that largely benefited the US, China and emerging markets until some of those markets, most notably Brazil and Russia, were walloped by plunging prices in the commodities they exported.
But the eurozone’s economy is perking up, the US remains on a path of moderate economic growth, and rising commodity prices are beginning to lift the fortunes of those struggling emerging markets.

  Momentum Unfolding
“We see a global economy that has a spring in its step,” Lagarde said in a speech last week, her most upbeat assessment in years. In January, the IMF predicted the global economy would grow 3.4% this year and 3.6% in 2018, up from 3.1% last year.
“But,” she added, “just as we see this momentum unfolding, we also see–at least in some advanced economies–doubts about the benefits of economic integration, and about the very architecture that has underpinned the world economy for more than seven decades.” Warning of “clear downside risks”, she identified “the sword of protectionism hanging over global trade.”
Trump has threatened to slap Chinese and Mexican imports with big tariffs. His intent is to lower the US trade deficit with those countries, part of his vow to bring back some of the hundreds of thousands of US manufacturing jobs lost to those countries the past two decades.
Meanwhile, the UK’s “Brexit” from the European Union, which will take two years to negotiate, is expected to disrupt trade relations between Britain and the rest of the 28-nation bloc.
The IMF, by contrast, espouses a policy of free and open trade, in part to lift up emerging and developing countries and promote solid overall growth in a world in which nations are increasingly interdependent.
A prime example of the clash, Cornell’s Prasad said, is Trump’s assertion last week that the dollar is “getting too strong”. A strong dollar hurts US exports by making them more expensive for overseas customers. But a weak greenback makes imports more expensive for US consumers, ultimately harming the countries that US manufacturers are targeting for their exports.
Similarly, hitting China and Mexico with tariffs may provide some short-term boost to the US economy but is likely to spark retaliation from those countries, hurting American exports and ultimately leading to more US job losses than gains, Prasad said.
Protectionist trade policies also foment uncertainty that can hamper investment, Prasad said. The US share of global foreign direct investment–meaning the building of factories and other spending in countries by foreign nations–fell to 22% in 2015 from 37% in 2000, though that’s up from 15% in 2009, according to the Organization for International Investment.
This week, IMF and World Bank officials, and foreign ministers are likely to press US Treasury Secretary Steven Mnuchin and other US representatives for a clearer picture of both US trade policy and funding plans, said Edwin Truman, former assistant US Treasury secretary for international affairs.

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