Top global bodies vow to defend free trade against protectionism

BERLIN • The world's top multi- lateral economic institutions have vowed in a joint statement to defend free trade against creeping protectionist trends, amid growing global alarm over US President Donald Trump's "America First" call.

Global trade has brought benefits from increased productivity to lower prices, and an open trading system based on well-enforced rules is critical to world prosperity, the International Monetary Fund (IMF), World Trade Organisation (WTO), World Bank, International Labour Organisation and Organisation for Economic Cooperation and Development said in a joint statement on Monday.

"Disappointing trade growth figures and the danger of increasing protectionist tendencies give us a clear incentive to support the international trading system even more," they said.

At a meeting in Berlin, the leaders of the international organisations, joined by German Chancellor Angela Merkel, stressed the role of the WTO in creating "new growth, employment and development opportunities".

The institutions cited research finding that manufacturing regions that were more exposed to imports from China since about 2000 saw "significant and persistent losses in jobs and earnings, falling most heavily on low-skilled workers".

"Workers displaced from manufacturing tend to be older, less educated and longer tenured in the lost job than workers displaced from other sectors, and in turn tend to take longer to return to work," they added.

The institutions recommended more active government policies beyond traditional unemployment income benefits to retrain and redeploy workers left idle by imports, including programmes to encourage more worker mobility.

These could include re-location allowances to help workers move to regions with better employment prospects and credit policies aimed at helping firms facing import competition to reorient business models or invest in new technologies.

The institutions cited research showing that a one percentage point increase in trade openness raised productivity by 1.23 per cent in the long run. They also cited research showing that open trade is estimated to have reduced by two-thirds the price of a basket of goods consumed by a typical low-income household in an advanced economy.

IMF managing director Christine Lagarde on Monday forecast that growth over the next two years would be more favourable than last year. She said: "Our forecast for 2017 and 2018 is certainly more favourable than what we have seen in 2016, and probably a bit more so than we had forecast previously."

The IMF will release its world economic outlook later this month.

Ms Lagarde also said the IMF has identified two key concerns: Persistent low productivity and excessive inequalities that grew with that low productivity.

Finance ministers and central bankers from around the world will gather in Washington next week for the first biennial meetings of the IMF and World Bank since Mr Trump's election last November.

AGENCE FRANCE-PRESSE, REUTERS

A version of this article appeared in the print edition of The Straits Times on April 12, 2017, with the headline 'Top global bodies vow to defend free trade against protectionism'. Print Edition | Subscribe