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April 21, 2017

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IMF can cooperate with Trump to improve global trade: Lagarde

IMF can cooperate with Trump to improve global trade: Lagarde

WASHINGTON: International Monetary Fund (IMF) Managing Director Christine Lagarde said on Thursday she believes the IMF can work successfully with the Trump administration to improve the global trading system, but added that open trade must be preserved as a growth engine.

Lagarde told a news conference at the opening of the IMF and World Bank spring meetings in Washington that the IMF saw the need to reduce subsidies and other trade distortions that limit competition, but also said "protectionist measures" needed to be avoided.

"From the various contacts that I´ve had with the administration so far, I have every reason to believe that we will make progress, that we will cooperate all together in order to support and indeed improve the system as we have it," Lagarde said.

World finance leaders gathered on U.S. President Donald Trump´s home turf to try to nudge his still-evolving policies away from protectionism and show broad support for open trade and global integration.

The IMF and World Bank spring meetings bring the two multilateral institutions´ 189 members face-to-face with Trump´s "America First" agenda for the first time, just two blocks from the White House.

Jim Yong Kim, president World Bank Group in a separate media briefing said the multilateral lender does not plan to change its stance on financing alternative energy projects and mitigating the effects of climate change.

Asked about the Trump administration’s skepticism about climate change at a news conference, Kim said the World Bank would continue to work with governments and the private sector to boost financing for alternative energy, especially in China, India, Indonesia, the Philippines, Pakistan and Vietnam.

"The science of climate change didn´t change with any particular election, and I don´t see that it will," Kim said. "We have to be an evidence-based organization." The IMF in particular has sounded warnings against Trump´s plans to shrink U.S. trade deficits with potential measures to restrict imports, arguing in its latest economic forecasts that protectionist policies would crimp global growth that is starting to gain traction.

Trump administration officials are now pushing back against such warnings by arguing that other countries are more protectionist than the United States.

Trump launched the week by signing an executive order to review "Buy American" public procurement rules that have long offered some exemptions under free trade agreements, and by lashing out at Canadian dairy restrictions.

In addition to warnings on trade, the IMF on Wednesday unveiled two studies pointing out dangers from fiscal proposals that Trump is considering. These included warnings that his tax reform ideas could fuel financial risk-taking and raise public debt enough to hurt growth.

Making tax reforms "in a way that does not increase the deficit is better for growth," added IMF fiscal affairs director Vitor Gaspar.  The advice may simply be ignored, especially after U.S. Treasury Secretary Steven Mnuchin last month insisted that an anti-protectionism pledge be dropped from a Group of 20 communique issued in Baden-Baden, Germany, said Eswar Prasad, former head of the IMF´s China department.

"The IMF has little leverage since its limited toolkit of analysis-based advice, persuasion, and peer pressure is unlikely to have much of an impact on this administration´s policies," said Prasad, now an international trade professor at Cornell University.

Mnuchin´s decision against naming China a currency manipulator last week removed one concern for the IMF ahead of the meeting. Lagarde also noted on Wednesday that the IMF would listen to all of its members, and work for "free and fair" trade. Lagarde is set to interview Mnuchin on stage during the meetings.

 

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