Update, not destroy, trade system: IMF chief

Lagarde makes call to reject protectionism; economic leaders slam Trump's tariff tactics

IMF Managing Director Christine Lagarde speaking during a trade conference at the 2018 IMF World Bank Group Annual Meeting at Nusa Dua in Bali, on Oct 10, 2018. PHOTO: REUTERS

Countries must come together to modernise - not dismantle - the global trade system, International Monetary Fund (IMF) chief Christine Lagarde said yesterday, in a rallying cry against protectionism echoed by economic chiefs rattled by recent trade disputes.

As United States President Donald Trump taunted China with tariffs on a further US$267 billion (S$369 billion) of Chinese imports, leaders of global economic bodies attending the yearly meetings of the IMF and World Bank condemned such tactics.

The world, they said, must stand together to defend the multilateral trading system, and improve it so that the gains are distributed more evenly, instead of abandoning it.

"The trading system is not perfect. We never said it was. But it represents the best efforts of governments around the world working together for 70 years to find ways to cooperate," said World Trade Organisation chief Roberto Azevedo.

"It took a lot of people and a lot of time to push the boulder this far up the hill," he said. "It is vital that everyone who believes in the system raises their voice."

World Bank chief Jim Yong Kim said companies were putting investment decisions on hold, a move which hampers growth prospects.

"Every country will feel the negative effects," he said.

Their remarks come a day after the IMF cut its forecast for annual global growth to 3.7 per cent, pointing to rising trade tensions.

Ms Lagarde said she was hopeful. "There is an appetite to improve and expand trade," she said, citing the TPP-11 - a revised Trans-Pacific Partnership after the US pullout - and progress on the US-Mexico-Canada deal. "Let us use that momentum to turn tension into rapprochement."

She added: "We need to join hands to fix and modernise the global trade system, not destroy it."

"We need to implement domestic policies to ensure that global trade is more effective in delivering for people - all people," she noted, while proposing greater investment in social safety nets and training.

Ensuring inclusive growth amid global uncertainty was a key theme at several sessions yesterday.

Delegates were united on one point: Protectionism will not work.

European Union economics and finance chief Pierre Moscovici said: "The question of inequalities has to be addressed in our own societies through domestic policies."

Indonesia's Finance Minister Sri Mulyani Indrawati said at a separate session that effective policies - open economies, investments including in human capital and good governance - had enabled East Asia to outperform other regions and lifted millions out of poverty.

But the former World Bank managing director said slower economic expansion in China and ageing populations in some countries were a looming challenge.

"The clock is ticking, and there is not much time left for East Asian countries to avoid the middleincome trap," she added, referring to economies that stagnate once they reach middle-income status.

Malaysia's Finance Minister Lim Guan Eng called for growth to be inclusive, adding: "What is the point of having very good economic numbers if you do not increase the purchasing power of the people?"

Reforms to support inclusive and more sustainable development, and to avert financial crises, are key themes of the report of the G-20 Eminent Persons Group on Global Financial Governance, chaired by Deputy Prime Minister Tharman Shanmugaratnam, due to be released tomorrow.

Yesterday, Mr Tharman said on Twitter that he had an excellent discussion with heads of regional financing arrangements on their working with the IMF to build a stronger global financial safety net.


Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on October 11, 2018, with the headline Update, not destroy, trade system: IMF chief. Subscribe