Global finance leaders dodge conflict with Trump White House

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 labeled “the New Mediocre.” The IMF expects the world economy to expand 3.5 per cent this year, up from 3.1 per cent 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 Saturday, 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 Saturday, 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.

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Associated Press writer Matthew Pennington contributed to this report.

Paul Wiseman And Martin Crutsinger, The Associated Press

by Canadian Press

Global finance leaders dodge conflict with Trump White House

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