World financial bodies warn Trump about protectionism

World financial bodies warn Trump about protectionism

Troy Powers
April 13, 2017

In a report published today the fund concluded that, globally, about half of the total decline in wages as a share of countries' national income can be attributed to the impact of technology, with the effect being most pronounced in advanced economies.

The IMF, the World Bank and the WTO said in their joint report that the anti-trade mood had been evident long before last year's USA presidential election but said this had followed a long period when trade had brought benefits to both developed and developing countries.

"The role of trade in the global economy is at a critical juncture".

It said the world´s richer countries should help workers affected by trade liberalization, which has grown increasingly unpopular in the post-financial crisis era, driving a rise in protectionism.

Finance ministers and central bankers from around the world will gather in Washington next week for the first biennial meetings of the International Monetary Fund and World Bank since Mr Trump's election last November.

The labour's share of income declines when wages grow more slowly than productivity, and the result is that a growing fraction of productivity gains has been going to capital, said the International Monetary Fund.

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They also propose that education systems prepare future workers for a changing job market and that laws in all areas do not hinder the mobility of people.

"Together with a risk of protectionism and tighter financial conditions as United States monetary policy normalises, these changes make for a more challenging environment", it said.

Still, the three multinational groups insist that greater progress toward freer trade is "important to reinvigorating global growth", repeating their longstanding view that free trade spreads broad economic benefits.

The IMF World Economic Outlook for 2017 also projects that raise in U.S. interest rates and a rising protectionist rhetoric in advanced economies would slow the growth of emerging economies this year.

It noted that "adjustment to trade can bring a human and economic downside that is frequently concentrated, sometimes harsh, and has too often become prolonged".

The IMF sees a more favorable outlook for the global economy this year and next than in 2016, but it has concerns beyond the near-term, IMF Managing Director Christine Lagarde said. For this year's forecast, WTO Director-General Roberto Azevedo set a range of between 1.8 percent and 3.6 percent depending on factors including the interest rate environment, fiscal policy, the results of upcoming elections, and the level of appetite for more protectionist or anti-globalization policies.