Economy

Trade clampdowns are 'self-inflicting wounds' says IMF chief

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The International Monetary Fund predicts that the world economy will grow 3.5 percent this year, up from 3.1 percent in 2016. (April 20) AP

Referring to the Trump administration’s inward-looking economic policies, the head of of the International Monetary Fund said Thursday the organization is concerned about trade and urged countries to refrain from adopting protectionist measures.

“Trade is a major engine for growth, one of the pillars of prosperity,” Christine Lagarde, the IMF’s managing director, said in a press conference that started the organization’s spring meetings in Washington, D.C.

“We will certainly be looking at how we can participate in that and how it can be done in as efficient, fair and global ways as possible,” she said. “That requires a level playing field … not protectionist measures.”

President Trump has signaled that he will evaluate trade deals and renegotiate them to help U.S. companies and curb the nation’s growing trade deficit.

Lagarde downplayed any potential conflict with the White House on trade issues, saying she has “every reason to believe that we will make progress, that we will cooperate all together in order to support and indeed improve the system as we have it.”

But she acknowledged that international trade agreements are rife with non-compliance violations — about 3,000 worldwide since 2008 — and that ways to settle disputes need improvement. “I’ve been saying that for two years,”  she said. “We will contribute our part.”

But subsidies and other measures that restrict trade are “self-inflicting wounds,” she said. “There are two clear forces that drive productivity — innovation and trade. We need to keep that growing.”

Lagarde didn’t refer to Trump directly, but her comment echoes similar warnings she has issued in recent days regarding trade. Speaking at a press conference earlier this month in Berlin, she said global economic growth could be cut off by a “sword of protectionism.”

After the IMF raised its forecast for global economic growth this week, Lagarde expressed optimism that “spring is in the economy as well.”

The global economy is expected to expand by 3.5% this year and 3.6% in 2018, compared with growth of 3.1% last year, it estimated.

Legarde hoped that trend would continue in the medium and longer term, adding, “It is warmed by rays of sensible policies.”

“We need to make sure that this momentum is sustained … that growth is shared more equitably,” she said.

Her policy proposals included “making tax and benefit systems more equitable” and boosting infrastructure investment. She also urged countries to “mitigate the impact of structural changes” by possibly raising minimum wages, providing income tax credit, increasing job training, and facilitating labor mobility through relocation support and job search help.

Global economic growth could also be stymied by actions that could hurt future generations, she said, referring to debt burden, unsustainable pension systems, not maintaining infrastructure and the impact of climate change.

Follow USA TODAY reporter Roger Yu on Twitter @ByRogerYu.

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