IMF members fail to settle protectionism issue

Concerns over trade protectionism brought up in the International Monetary Fund’s (IMF) Spring Meetings has struck an anticlimax ending, as the Fund even declined to mention the ‘protectionism’ word in its joint-statement on Saturday.

The IMF Committee (IMFC), the steering body of the Fund, vowed to join effort to reduce global imbalances, but revoked their past pledge to resist all forms of protectionism—that has been growing especially among advanced countries such as the United States (US) with its ‘America first’ slogan.

The 1,886 -word communique, which concluded the IMF’s 35th Spring Meetings, preferred to repeat its past commitment on currency exchange rates. It is a direct blow to China that has been repeatedly accused — especially by the US — of devaluing its Yuan to jack up export competitiveness.

“We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes. We will also work together to reduce excessive global imbalances by pursuing appropriate policies. We are working to strengthen the contribution of trade to our economies,” the IMFC said in a statement on Saturday.

It is a significant step back as the IMF managing director Christine Lagarde in her first statement to the press on Wednesday openly expressed concern over the issue, and pledged to optimize the meeting to find a better solution.

“IMF is not a trade organization. But we are concerned about trade as it has been a major engine of growth, one of pillars of prosperity. We're certainly looking for on how we can participate in that [...] how it can be done in the most efficient, fair way, and no protectionist measure going forward,” she said.

According to the IMF’s data, the number of violation against the principle of multilateral free trade commitment had increased steadily from 2 percent, to 6.5 percent. From G-20 countries alone, there were 3,000 non-compliance trades since 2008.

“How is that to improve it? We believe, in this institution, in the value of dialogue. We will contribute our part. It is our mission in order to make sure that we are not to jeopardize the engine growth, which is the evidence of key component of productivity,” Christine said.

Lagarde’s early comment reflected many countries’ hope to see specific conclusion on protectionism. Finance Minister Sri Mulyani Indrawati in her previous statement in Jakarta —before she headed to Washington — expected to see the IMF to address the issue.

During the United States Indonesia Society (USINDO) forum on the sidelines of the Spring Meetings on Thursday, Sri Mulyani blatantly criticized the US’ executive orders which put Indonesia in its trade hit list.

It’s a wrong measure because the US has seen trade deficits against 101 countries, meaning that the US’ trade problems are not necessarily sourced from the 16 countries it is aiming for trade-probe, she said.

Rhetoric raised by global economic leaders in the Spring Meetings varied, but mostly refuted the protectionist views. China is the most vocal among them, pointing the anti-globalization issue in the very first paragraph of its statement.

“Political and policy uncertainties, and the rising anti-globalization and protectionism sentiment against international trade and investment, pose challenges to global growth,” wrote the People’s Bank of China Governor Zhou Xiaochuan.

All members, he continued, should continue to advocate multilateral cooperation, strengthen macroeconomic policy coordination, and prevent and address spillover effects. It is especially important to enhance the multilateral system of open and free trade and investment, jointly resist protectionism, and accelerate the liberalization of global trade and investment.

German Finance Minister Wolfgang Schaeuble said that his country committed to keep the global economy open, resisted protectionism and kept global economic and financial cooperation on track. “There is evidently a need to better communicate the benefits of trade and globalization,” he wrote in his statement to the IMFC.

Meanwhile, the US Treasury Secretary Steven Mnuchin did not refer to resisting protectionism. Under Trump’s administration, the world largest economy is trying to suck up the juice of free trade to enhance its economy.

Instead, Mnuchin said that the US would continue to promote an expansion of trade with those partners committed to market-based competition, while “more rigorously defending themselves against unfair trade practices.”

During the conclusion of the meeting on Saturday, Bank of Mexico governor Agustin Carstens, who heads the IMF’s steering committee, said protectionism was a “relative term” and “ambiguous” as, according to him, there is no country that does not have any provisions on trade.

“I think everybody is in line that we need free and fair trade, and I think that is what is really reflected in the communique. There was very strong consensus that we should strengthen contribution of trade to our economies,” he claimed.