NUSA DUA, BALI - Calls to resist the push to turn inwards, and to uphold the multilateral trading system, reverberated at a summit of global finance chiefs on Wednesday (Oct 10), as the brewing Sino-American trade war continues to unsettle markets and stir anxieties.
Prominent United States economist Jeffrey Sachs urged the world to speak up against US President Donald Trump's decision to impose tariffs on billions of dollars of Chinese goods, charging that the war was an "economically illiterate" geopolitical power play.
"It is the US trying to stop China's growth. This is about US geopolitics, how to stay No. 1," he said at the International Monetary Fund-World Bank meetings on Wednesday.
Prof Sachs, the director of the Centre for Sustainable Development at Columbia University, was speaking on a panel about growth challenges confronting Asia, which include the ageing population and digitalisation.
Prof Sachs and his fellow speakers stressed that the open, multilateral trading system has been central to Asia’s growth.
Professor Yiping Huang from Peking University’s National School of Development said: “I think openness should stay, especially for this region. This region is built on trade openness and I think that will still be very necessary for us to continue. And not just open trade, but open investment, open migration, and open exchanges of ideas.”
”That is the fundamental to push ahead growth in the region.”
He added that while the Chinese government has tried hard to reach an agreement with the US, “after five months of negotiation, you will see it’s almost impossible partly because some of the demands are not very reasonable, and partly because the president himself changes his mind”.
And China should not let simmering tensions with the US derail it from its own progress, he said.
“What really is important for China is to focus on its own task. Look at the 40 years of reform, what made China’s economy successful - market reform and integration into the international system. I think China should just keep doing that,” he said.
Asian Development Bank president Takehiko Nakao and the Reserve Bank of India’s former governor Y V Reddy also spoke about the impact that the trade war may have on the global supply chain.
If this escalates, it will disrupt supply chains, a very important basis of growth, especially in East Asia, and will impact investment and consumer confidence in the region, noted Mr Nakao.
But, he pointed out, while trade is important in Asia, there has also been a strong growth in consumption that can help buoy countries in the region.
IMF deputy managing director Mitsuhiro Furasawa in his welcome remarks reiterated that, with the outlook for trade weakening, Asia needs to rebalance its growth, and depend less on slowing demand from outside the region.
“Intra-regional integration could become a new engine of growth and help offset any decline in global trade,” he said.
During the panel discussion, Prof Sachs said the world should not go along with unilateral tariffs imposed “under phony pretences”.
“The trade dispute is very dangerous, and it’s the work of the fertile imagination of Donald Trump. And it should not be taken as given. It should be stopped, and it should be resisted,” said Prof Sachs in a scathing tirade on Mr Trump.
“The US is breaking international trade rules right and left. It has violated every international standard, and it has threatened Asian economies. It has threatened the world economy,” he added.
Prof Sachs said the world must not allow itself to be bullied out of the international legal system, pointing out that there are international rules and dispute settlement procedures for economies to thresh out their problems.
The US has accused China of unfair trade practices, and criticised the economic giant for stealing American jobs. But such accusations, he said, are “completely trumped up”.
“They’re grossly exaggerated. They are for the convenience of this American security vision. If there were really complaints, take them to the World Trade Organisation,” said Prof Sachs.
“Let’s not be quiet about it, because if you let this kind of extreme economically-illiterate, geopolitically-dangerous view prevail, we’re going to get into a hell of a lot of trouble. This is not going to end quietly or easily, and Asia’s already had trillions of dollars of wealth written off the stock market in the last year. Enough. Somebody has to say no.”