The head of the International Monetary Fund is warning that the global trading system is in danger of being “torn apart.”
In a speech prepared for delivery in Hong Kong Wednesday, Christine Lagarde urged nations to “steer clear of protectionism.” That may be a reference to Washington’s recent moves to slap large tariffs on imported steel and other products. China responded by raising tariffs on U.S.-made products, beginning a cycle that some experts warn could escalate further into a trade war.
Lagarde says the benefits of trade far outweigh the costs and has credited unfettered global trade for drastically reducing the number of people around the world living in extreme poverty. Lagarde and other experts say everyone loses in trade wars, particularly the 800 million people around the world who, the World Bank says, remain mired in poverty.
While Lagarde’s comments implied criticism of the Trump administration, she also urged nations, presumably including China, to do a better job of protecting intellectual property. President Trump and many foreign businesses operating in China have complained that they are pressured to turn over technology secrets to Chinese partner companies in exchange for access to the huge Chinese market. She also urged economic reforms, including ending policies that unfairly favor state-owned enterprises.
Lagarde says the global economy is experiencing a strong upswing, and says now is the time for nations to make economic reforms such as opening up the service sector in developing economies, and doing more to use digital technology to improve the the delivery of government public services. She warns that economic reform is more urgent now because of the growing uncertainties arising from trade tensions, uncertain geopolitics and rising fiscal and financial risks.
Lagarde’s speech comes ahead of next week’s meetings of the International Monetary Fund and World Bank in Washington, where top economic and financial leaders and experts from around the world will gather to seek solutions to problems in banking, trade, deficits and many other topics.