WASHINGTON: Global finance leaders on Thursday publicly confronted the rising unpopularity of trade liberalization, saying world economies needed to strive for more inclusive growth.
With Republican presidential candidate Donald Trump leading a surge of anti-free trade sentiment in the United States, and Britain voting to secede from the European Union, top central bankers and finance ministers were pressed to defend long-standing ideology at the World Bank and International Monetary Fund annual meetings.
“We shouldn’t apologize for what has happened and hundreds of millions of people being lifted out of poverty and opportunity being created,” Mark Carney, governor of the Bank of England, told a panel on the global economy.
“But there are challenges with distribution,” he said. “How do we work with people to share those fruits more effectively and how do we make trade tangible?”
German Finance Minister Wolfgang Schaeuble expressed alarm at the rise of anti-trade populism across the developed world.
“If you look at what we have achieved in reducing the number of very poor people all over the world,” he said.
“We must have in mind that we must not increase the gap between elites — political leaders, economic leaders, media leaders –and the people. Otherwise we will risk increasing populism and that’s one of the major risks.”
At the same time, IMF Managing Director Christine Lagarde, whose organization has long advocated lowering trade and investment barriers around the world, warned that now was not the time to close the door on globalization, which she said had benefitted so many.
“We don’t think it’s time to push against it,” she said.
Long promoted by the major international development institutions and leading economies, the message of trade liberalization faces an increasingly unreceptive audience.
In the United States, Trump has rallied supporters by promising a trade war with China and retaliatory import duties on Mexico.
Across the Atlantic, the British vote to leave the European Union threatens to spur other countries to roll back European economic integration. The free-trade pact currently under negotiation with the United States, the Transatlantic Trade and Investment Partnership (TTIP), faces stiff resistance in Europe.
Globalization finds itself accused of depressing wages, causing industrial decline and keeping low-skilled workers unemployed.
“I’m a believer of free trade. I think free trade will promote the welfare of mankind,” said Yi Gang, deputy governor of the People’s Bank of China.
“But we have to deal with the inclusive growth seriously. I think now the problem, the challenge we’re facing is real,” he said.
“We gain a lot of efficiency from globalization, from free trade, but also we have to see the problem of the growth is not even, income distribution is not even.”
Speaking elsewhere in Washington Thursday, US Treasury Secretary Jacob Lew steadfastly defended his administration’s two big trade projects, TTIP and the Trans-Pacific Partnership.
But he also tried his hand at the growth-equality balancing act.
“If you win the argument that a trade agreement grows the economy, you’re most of the way there,” he said at the Peterson Institute for International Economics.
“There’s a broad sense of anxiety that growing economies don’t necessarily get to people where they live,” he added.
The IMF and World Bank now more openly concede that global growth benefits too few and globalization’s losers should receive dedicated support.
Oxfam International on Wednesday said the IMF and World Bank were acknowledging the reality of social injustice in the current globalized economic regime.
“By saying that globalization needs to work for all, Lagarde has recognized that it currently works predominantly for an elite minority. This has to change,” said Max Lawson, head of inequality policy at Oxfam International.