IMF Chief calls for removal of protectionist policies

IMF chief Christine Lagarde characterized the near term future of the world economy as bright, but she warned that long term challenges await. She said high debt levels, financial instability, and lack of trust on existing multinational trade frameworks are some of the risks the world should take care of in the long run.

Christine Lagarde, managing director of the International Monetary Fund, talks to reporters at a press conference during the 2018 IMF spring meetings. [Photo: China Plus/Liu Kun]

The IMF has set its forecast for world economic growth this year and next year at 3.9 percent while slightly uplifting its predictions of growth for major economies such as China, the US and the eurozone from a few months ago.

Lagarde said to tackle the risks in the long run, national governments should keep working on structural reforms, create more policy buffers, and more importantly forsake protectionist approaches on trade.

"And third policy, steer clear of all protectionism measures. In that respect, we believe that each country can do more from looking at its own domestic policies to helping those affected by the dislocation from technological change and trade. So that relates to measures that need to be taken at home to improve compliance but also to deal with those that are not benefitting from trade."

Christine Lagarde (center), managing director of the International Monetary Fund, talks to reporters at a press conference during the 2018 IMF spring meetings. [Photo: China Plus/Liu Kun]

Addressing the recent trade tensions between the US and China, Lagarde said the current situation threatens global trade and investment, both of which are finally picking up momentums after the financial crisis and currently the two main factors driving the world economy.

"If you boil it down to the GDP decimal and you associate that with that threat or the other threat, some people might say that it is not particularly meaningful. As I said, investment and trade are two key engines that are finally picking up. We do not want to damage that. It does not mean to say that only one party has to do something. Everybody has to do something. And I would not limit the discussions between China and the US. All partners have to talk to each other."

The spring meetings of the two leading international financial institutions come after the Trump administration recently announced additional tariffs on imported steel and aluminum and threatened to impose broad tariffs against Chinese imports.

These unilateral protectionist measures have sparked widespread criticism and provoked threats of retaliation from major trading partners, raising the prospect of escalating global trade conflicts that threaten the global recovery.

At a press conference, Lagarde also welcomed the new opening-up policies by the Chinese government. She said though still at an early age, these policies are certainly putting China on the right track of economic growth.

"I was actually in Bo'ao in the province of Hainan when President Xi announced some of the measures that will be taken to open up, remove caps, and reduce tariffs. Certainly those are helpful measures. We will be very attentive to the actual implementation and delivery of such measures, because this is what actually matters. But it is certainly going in the right direction of removing barriers and facilitating investment."

Chinese president Xi Jinping pledged a series of new opening-up policies at the recently concluded Bo'ao Forum in China's Hainan province, promising to cut investment barriers, lowering auto import tariffs and so on.