Global finance leaders dodge conflict with Trump White House
A call for nations to ``resist all forms of protectionism'' absent from latest communiqué.
WASHINGTON — Global finance leaders sought to avoid conflict with the Trump administration over trade and environmental policy and welcomed signs the world economy is pulling out of the doldrums.
The International Monetary Fund dropped a sharp condemnation of trade protectionism and references to climate change from a statement at the close of its spring meetings with the World Bank. Gone was a call for nations to “resist all forms of protectionism” that had been in an October communique.
During the presidential campaign, Donald Trump threatened to impose tariffs on China and Mexico and called global warming a hoax. Since taking office, Trump has slashed environmental regulations, and his administration has planned big cutbacks at the Environmental Protection Agency.
The meetings of the 189-nation IMF and World Bank, which wrapped up April 22, were dominated by concerns over the rising anti-globalization tide that carried Trump to the White House and set the stage for Britain to leave the European Union.
Skepticism over the benefits of free trade persists despite signs of economic improvement. The global economy is finally recovering from a long period of economic languor that IMF managing director Christine Lagarde labelled “the New Mediocre.” The IMF expects the world economy to expand 3.5% this year, up from 3.1% in 2016, helped by rising commodity prices and the surprising resilience of China’s economy.
But Lagarde and World Bank President Jim Yong Kim said world governments needed to do a better job helping those being left behind economically. Otherwise, a backlash against globalization could pressure governments into adopting protectionist policies that would harm world trade and growth.
In its communique April 22, the IMF urged nations to avoid “inward-looking policies,” but did not include the stronger language of the October communique.
At a closing news conference, Lagarde and Agustin Carstens, head of the Bank of Mexico and chair of the IMF’s policy committee, sought to downplay the changes. Lagarde noted that a separate document setting out the IMF’s policy agenda did retain strong language condemning protectionism and promoting efforts to combat climate change.
Carstens said that it was important to recognize the viewpoints of different countries.
“We all want free and fair trade and that is what is reflected in the communique,” 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 communique 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 communique at the German meeting 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 communiques reflect the Trump administration’s determination to undo decades of American policy in favour of ever-freer trade. “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 April 22, Mnuchin said that the internal debate over the wording of the IMF communique had taken much less time than the debate over the wording of the G-20 communique last month. He said that the administration’s goal was to make trade fairer and was not aimed at erecting protectionist barriers.
“The United States is probably the most open trading market there is,” Mnuchin said.