World Economy

IMFC Pledges Joint Efforts to Reduce Global Imbalances

Donald Trump has threatened to impose punitive tariffs of up to 45% against Mexico, China and other nations he believes are competing unfairly with American workers
IMFC Pledges Joint Efforts  to Reduce Global ImbalancesIMFC Pledges Joint Efforts  to Reduce Global Imbalances

The IMF’s steering committee adopted the position on trade taken by the Group of 20 last month in an effort to accommodate Donald Trump’s administration, which is considering how far to go in fulfilling the president’s campaign pledges to impose tariffs and reshape international accords.

Members of the International Monetary Fund pledged joint efforts to reduce global imbalances, but did not repeat their past pledge to resist all forms of protectionism—which has been growing among many advanced and emerging economies, news outlets reported.

A communique from the International Monetary and Financial Committee, released Saturday in Washington, said that officials “are working to strengthen the contribution of trade to our economies,” Like the G-20 communiqué, the committee’s statement omits a call from its previous missive in October to “resist all forms of protectionism”.

Asked about that change, Agustin Carstens, the Mexican central bank governor who serves as chairman of the IMF committee, said the statement still reflects broader agreement that nations want a level playing field on trade.

The global finance leaders dropped a sharp condemnation of trade protectionism and references to climate change from a closing statement that wrapped up the spring meetings of the 189-nation International Monetary Fund and the World Bank.

This year's meetings were dominated by a debate over how to respond to a rising tide of anti-globalization sentiment evidenced in the United States by the election of President Donald Trump, who pledged during last year's campaign that he would reduce America's huge trade deficits which he blamed for the loss of millions of good-paying factory jobs.

Trump has threatened to impose punitive tariffs of up to 45% against Mexico, China and other nations he believes are competing unfairly with American workers. During his presidential campaign he called climate change a hoax.

At a closing news conference, IMF Managing Director Christine Lagarde and Carstens sought to downplay the changes. Lagarde noted that strong language condemning protectionism and promoting efforts to combat climate change, while taken out of the communique, remained in a separate document setting out the IMF's policy agenda, AP reported.

Carstens said that it was important on the issue of trade to recognize the viewpoints of different countries.

Free and Fair Trade

“We all want free and fair trade and that is what is reflected in the communiqué,” he told reporters when asked why the language on protectionism had been dropped.

A similar change on the issue of protectionism was made in a communiqué that the Group of 20 major economies issued last month in Baden-Baden, Germany. Steven Mnuchin, attending his first international gathering as Trump's treasury secretary, had defended the change in the G-20 communiqué by saying, “The historical language was not really relevant.”

Eswar Prasad, a trade economist at Cornell University, said the changes in the IMF and G-20 communiqués showed the Trump administration's desire to signal that US policy will be different under a new president.

“The G-20 consensus on issues such as free trade and combating climate change is crumbling in the face of the Trump administration's hostility to those positions,” Prasad said. “The notion of allowing for freer trade has run up against the Trump administration's conviction that its major trading partners are manipulating trade and currency policies to their own benefit.”

At a joint appearance with Lagarde on Saturday, Mnuchin said that the internal debate over the wording of the IMF communiqué had taken much less time than the debate over the wording of the G-20 communiqué last month. He said that the administration's goal was to make trade more fair and was not aimed at erecting protectionist barriers.

The spring IMF and World Bank meetings took place against the backdrop of an improving global economy, helped by better performances in the United States and China, the world's two biggest economies, and in a rise in commodity prices which has helped many developing nations.

Despite the brighter outlook, the IMF's closing communiqué warned of a number of risks ranging from weak productivity growth to high debt levels and “heightened political and policy uncertainties.”


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