IMF bats for abolishing trade barriers to push global economic growth

The Dollar Business Bureau Describing trade protectionism as a “self-defeating” economic policy, the International Monetary Fund (IMF) Managing Director, Christine Lagarde on Thursday asked the world community to remove trade barriers and lift growth and employment across the globe. “If you care about growth and innovation; if you care about jobs and the real incomes of the middle-class; if you care about poverty reduction and greater economic fairness; if you do care about all these things, you need to be serious about fostering global trade,” said Lagarde addressing the US Ex-Im Bank Conference held in Washington. She allayed apprehensions of developing countries towards trade facilitation, on the bone of contentions at the WTO conference held in Bali in December, and said that such a deal is important for developing economies. “The Bali deal is particularly important for developing economies because of its focus on trade facilitation, which involves reducing red tape and streamlining customs,” she added. Seeking major policy change in emerging economies, the IMF chief said that trade and integration into global value chains should be a central plank of development and growth strategies of the developing countries. “Many emerging market economies, especially in South Asia and Latin America, can still benefit greatly from integrating into the global economy through traditional trade liberalization. This may include unilateral efforts to open up trade and encourage foreign direct investment, especially in infrastructure. In Asia, in this decade alone, overall national infrastructure investment needs are estimated to be US$ 8 trillion. Reforms – including new trade agreements – encourage countries to further specialize in the goods and services in which they have a comparative advantage. By using their existing resources more efficiently, they can help lift world production and consumption. In other words: specialize in what you do best, trade for the rest. The classic gains from this strategy include lower prices for consumers and companies – and therefore higher real incomes – and a greater variety of goods and services available for purchase, she added. Trade reforms can also have a powerful indirect effect on growth by igniting and amplifying other structural reforms. Trade reforms can increase external competition in product and services markets. They can encourage key infrastructure investments. They can spur innovation through research and development and “learning by exporting”. And they can strengthen institutions by encouraging better governance and a better business environment. Reinvigorating trade is not just a “nice-to-have”. It is an “essential-to-have” – to help prevent what I have called the “new mediocre” of low growth over a long period. This is why the international community, including the G-20, is pushing for trade reforms as part of a comprehensive policy package to lift growth and employment,” Lagarde told the conference.    

This article was published on April 24, 2015 – 6:45 pm IST.