World finance officials, still searching for ways to rejuvenate a sluggish global economy, now face the added problem of dealing with a growing anti-trade backlash that threatens to make the economic situation worse. Officials say the solution is not to abandon support for trade but to make sure the benefits are more widely shared.
Finance ministers and central bank governors from the world’s 20 major economies are scheduled to wrap up their talks Friday. Attacks on globalization have risen in prominence with the June vote in Britain to leave the European Union and the US presidential campaign of Donald Trump.
The G-20 talks were being held in advance of the annual meetings of the 189-nation International Monetary Fund and its sister lending organization, the World Bank. Trump has made attacks on immigrants in the US illegally and America’s huge trade deficits central tenets of his campaign.
The root cause of both issues has been a prolonged anemic recovery from the Great Recession that followed the 2008 financial crisis, something that officials readily acknowledge. “We see growth as too low for too long and benefiting too few,” IMF Managing Director Christine Lagarde told reporters on Thursday. “It’s fertile … ground for political dynamics that can depress global growth even more.”
Lagarde said finance leaders need to pursue broader policies to boost anemic growth rates that go beyond the current heavy reliance on monetary policy to include increased government spending and tax cuts where feasible and attacking structural impediments to growth. She said it was critical to make greater efforts to make sure that the economic benefits were more widely shared.
Speaking at an opening news conference, Lagarde refused to specifically address the attacks being made by Trump, who contends that Washington policymakers have failed to reach good trade deals and are letting China, Mexico and other countries pursue unfair trade practices that have cost millions of American jobs and resulted in stagnant wage growth. Trump has also vowed to crack down on illegal immigration.
“I don’t comment on US elections. I simply note that trade has been … a great engine for growth,” Lagarde said, adding that trade has helped lift millions of people around the world out of poverty.
In Britain, the June 23 vote to leave the EU was also seen as a backlash against globalization and rising levels of immigration in Europe. Lagarde said instead of abandoning efforts to lower trade barriers, now was the time to make sure the benefits of trade were more equally shared. She said there was a need for “inclusiveness, the determination to make it work for all, to pay attention to those at risk of being left out.”
World Bank President Jim Yong Kim said there are now more developing nations in recession than at any time since 2009 at the depths of the Great Recession. He blamed the rising weakness on falling commodity prices and a slowdown in trade flows. Kim said finance officials need to expand efforts to attack inequality.
In an updated economic outlook prepared for these meetings, the IMF said global trade in goods and services will grow just 2.3 percent this year, the worst showing since a 10.5 percent fall in trade during the depths of the Great Recession in 2009.
The IMF’s updated economic outlook downgraded its estimate for US economic growth in 2016 to 1.6 percent, from the 2.2 percent it had predicted in July, reflecting the extremely weak start to the year. The US economy grew at an annual rate of 2.6 percent in 2015. The IMF is projecting overall global growth this year at a lackluster 3.1 percent.
The IMF and World Bank meetings will conclude Saturday following separate sessions of their policy-setting bodies. US Treasury Secretary Jacob Lew and Federal Reserve Chair Janet Yellen were representing the United States at the talks.
Lew said the United States would continue to argue that countries cannot simply rely on low interest rates engineered by their central banks to get out of the current global slowdown. He said governments should also be pursuing structural reforms and increased spending in such areas as infrastructure.
“We need to use all the policies that we have,” he said during an appearance at the Peterson Institute for International Economics. Lew said he believed support was building in other nations for greater use of government spending to help the recovery effort although he said he did not want to “over-dramatize” the movement.
Lew also repeated the Obama administration’s call for passage this year by Congress of the 12-country Trans-Pacific Partnership trade deal even though both Trump and Democratic presidential nominee Hillary Clinton have come out against the pact.