World Bank, IMF urge US, China to follow trade rules
The heads of the World Bank and IMF urged the US and China to play by world trade rules and de-escalate a dispute over China's technology development strategy that threatens to do lasting damage to the global economy. Christine Lagarde, Chief of the International Monetary Fund (IMF), said she'd advise Beijing and Washington to cool down and fix aspects of the world trading system.
Lagarde and World Bank President Jim Yong Kim spoke separately on the sidelines of the lenders' annual meeting in a resort zone of the Indonesian island of Bali. The event brings together Finance Ministers and Central Bankers from many economies, amid tight security: a line of armed personnel carriers were lined up alongside a beach path and access to the area was tightly controlled.
Lagarde said so far there had been no major damage from tariffs imposed by the US and China on each other's exports, but that they risk hurting "innocent bystanders". Lagarde's advice is: "De-escalate. Fix the system. Don't break it". The World Trade Organization has ways of addressing US complaints that China's policies unfairly extract advanced-technologies and put foreign companies at a disadvantage, she said.
Lagarde also said policies aimed toward an excessively "dominant position" were not compatible with free and fair trade. Earlier in the week, the IMF downgraded its global economic outlook, forecasting growth will be 3.7% this year rather than its earlier estimate for 3.9% growth. It also issued reports on government finance and financial stability that warn of the risks of disruptions to world trade.
Meanwhile, Kim said the World Bank was working with developing countries to prepare for a further deterioration. If tariffs were imposed to their most extreme limits there'd be a "clear slowdown and the impact on the developing countries would be greater," he said. "Trade is very critical because that's what has lifted people out of extreme poverty...We need more trade, not less," he said.
Kim said the bank had offered help to Indonesia for its recent natural calamity. The people gathered in Bali for the meetings got a taste of such hazards themselves with an overnight earthquake that shook hotels in the resort area cordoned off for the event. While the worst damage occurred on Java Island, not much damage was seen where the meetings are being held.
Bali, a popular tourist destination, reflects both the positive and negative aspects of Indonesia's own rapid development over the past three decades. Lagarde praised the democratic, Muslim-majority country of 260 million for making huge progress in improving its finances and fostering strong growth. But the by-products of the tourist boom in largely Hindu Bali have been significant inequality and environmental damage.
The annual meetings are taking place at a time of growing concern over trends other than trade, such as moves to raise borrowing costs in US and some other regions to help keep inflation in check. Rising interest rates are drawing investment flows out of emerging markets in Asia and Latin America at a time when growth in their exports is likely to slow.
Argentina and Pakistan are among countries grappling with potentially destabilizing financial woes. Also, concerns are growing over slowing growth in China and rising debts among some developing countries resulting from projects associated with China's "Belt and Road Initiative". On Monday, Pakistan Finance Minister Asad Umar said the country would seek a bailout loan from the IMF to address its mounting balance of payments crisis.
Asked whether help sought by Pakistan might amount to a "bailout" for Chinese loans, Lagarde said she hadn't yet seen a formal request from Umar but guessed she might receive one later in the day. Any such help would've to be completely "transparent," she added.