The
leaders of the International Monetary Fund and
the World Bank have
launched a strong defence of open markets and free trade, as concern grows that
the Brexit vote and calls for protectionism in the US presidential election
represent a backlash against globalisation.
Christine
Lagarde, the IMF’s managing director, said international
trade had been a force for good in the past few decades but that without a more
equal division of the benefits of growth there was a risk of barriers going
back up.
As
part of a concerted push back against protectionism, the World Bank’s
president, Jim Yong Kim, said
China had lifted 700 million people out of poverty as a result of trade and
opening its economy to competition.
Kim
said the UK’s vote to leave the European Union, the
US presidential race and looming elections in Europe were adding to
uncertainty. “These are all risks. Uncertainty is normally very bad for most
developing countries.”
Outlining
her global policy agenda, Lagarde said: “Policymakers should act and use a
balanced mix of all policy levers to revive demand and raise productivity, and
ensure the gains from technology and globalisation – which have led to
unprecedented global welfare gains in recent decades – are shared more broadly.
“A
retreat from globalisation and multilateralism is a serious risk at a time when
international cooperation and coordination are as critical as ever.”
Lagarde
said governments should press ahead with attempts to secure multilateral trade
deals, despite the difficulties involved, while providing help for workers
adversely affected by globalisation and technological change.
She
refused to comment on the American election, but made clear her opposition
to Donald Trump’s demand
that protectionism should be used to repatriate jobs to the US.
“The
rhetoric against trade would do harm to the economy. I call it economic
malpractice,” she said.
The
IMF believes the political shifts that have led to huge support for Trump and
the shock Brexit vote are the biggest current threat to a fragile global
economy.
Lagarde
welcomed the UK’s better-than-expected performance since the Brexit vote.
Ahead
of the EU referendum, she said the outcome would either be “pretty bad or very,
very bad”, but speaking in Washington on Thursday she said the IMF had
envisaged both mild and adverse scenarios.
“I am
encouraged that, because of good policies and the cooperation of central banks,
it is currently the mild scenario and not the adverse scenario.”
She
has welcomed the government’s announcement that negotiations on Britain’s
departure from the EU will begin by March next year, but said this week’s sharp
fall in the pound was the result of uncertainty about what Brexit would mean
for the financial services sector and for trade.
Following
Theresa May’s attack on ultra-low interest rates and quantitative easing,
Lagarde said: “We currently observe that monetary policy has been under a lot
of pressure to act. It has been the first port of call. It has acted in many
countries in isolation, which is not helpful.
“All
policies – monetary, fiscal and structural – have to come together. It can’t
just be left to central banks. They have used unconventional policies to
explore unchartered territories with benefits so far. But it can’t just be
monetary policy.”
Kim
said heightened political uncertainty coincided with the highest number of poor
countries in recession since the global slump of 2009.
He
said growth in sub-Saharan Africa was expected to be 1.6% this year and 2.9% in
2017, insufficient to keep up with population growth of 3% a year. “If growth
can’t keep up with population growth it is essentially negative growth”, he
said.
Source:
Gaurdian