IMF Urges Help for Trade-Affected Workers to Curb Protectionismby
Trade growth sluggish compared with pace of last three decades
Rising protectionism, not just slow GDP growth, a key factor
The International Monetary Fund said soothing the frustrations of displaced workers will be key to rolling back a tide of protectionism that’s hit global trade.
Growth in world trade has declined to about 3 percent per year since 2012, less than half the rate of expansion over the previous three decades, the IMF said in a report released Tuesday. The paper is part of the fund’s World Economic Outlook, released in full next week at the IMF’s annual meetings in Washington.
For years, growing trade in everything from iPhones to banking services was as an important engine of global economic growth. Between 1985 and 2007, world trade grew on average twice as fast as gross domestic product, according to the IMF. That trend came to an end over the last four years, when trade growth barely kept pace with economic output, said the Washington-based fund, which was conceived during the Second World War to oversee the global monetary system and promote open markets.
The slowdown comes against the backdrop of popular opposition to the free flow of people and goods that has roiled markets this year, undercutting support for the kind of measures that policymakers say have produced growth in recent decades, such as trade agreements.
Republican U.S. presidential nominee Donald Trump has tried to channel the dissatisfaction of blue-collar workers who blame job losses and weak wage growth on increased trade with countries such as China and Mexico. Both he and Democratic candidate Hillary Clinton oppose a free-trade deal with Pacific nations signed by President Barack Obama. The clock is running out to overcome resistance in Congress to finalize the 12-nation Trans-Pacific Partnership pact before Clinton or Trump move into the White House early next year.
“Policymakers need to address the concerns of trade-affected workers, including through effective support for re-training, skill building, and occupational and geographic mobility, to mitigate the downsides of further trade integration,” the IMF said.
The overall sluggishness of global growth is the main reason behind the trade slump, the IMF found. But other factors are playing a role, including a slowdown in trade negotiations and a rise in protectionism.
Since the global financial crisis, the reduction of import tariffs worldwide has been minimal, the IMF said. Meanwhile the pace of trade-deal signings has slowed, from nearly 30 agreements per year in the 1990s to roughly 10 since the crisis, according to the fund.
Slowing integration of global supply chains also contributed to the trade decline, the IMF said.
In separate reports, the IMF said that central banks are suffering from a decline in their perceived ability to combat weak inflation, and that China’s transition to a more consumption-driven economy, if managed well, could contribute to more sustainable global growth.