Bankers, politicians and analysts were united last night over the danger that the rising trend in protectionism led by the increasingly isolationist US administration could have on world trade and economic growth.
As the key meetings between finance ministers from the US and the 188 other members of the IMF begin this evening, they were determined to reaffirm their commitment to a borderless ideal of globalisation, deregulation and free trade ideals.
The chief concern, inevitably, arrives in the lumbering shape of Donald Trump. America’s president is easily cast as an anti-free-trade figure, having scrapped one multilateral trade deal, the Trans-Pacific Partnership, and threatened to remove the US from the longstanding North American Free Trade Agreement.
“The change in the US administration is worrying for everyone,” said Mario Guillén, Bolivia’s minister of finance. “The measures that the US takes or does not take will affect the whole world. Bolivia as a country is no exception to that and so any change in the measures that President Trump takes or his actions obviously could affect us.”
Guillén said Bolivia was unlikely to take a direct hit from a protectionist turn in the US, but only because it did not have an existing free trade agreement with the world’s largest economy. A greater threat, he said, stemmed from protectionism being embraced by other markets more closely linked to Bolivia’s economy. “What could affect us is if difficulties arise in other countries that we have trade relations with. It’s worrying. We’re looking closely at what might happen to see what actions we should take and what position we should assume with regards to our trade relationships.”
Even if Trump’s protectionist agenda so far has been more hot air than concrete action, fears that the world has already entered a more protectionist era have already taken root.
Janet Heckman, head of the EBRD’s Southern & Eastern Mediterranean region, said it was a “particular concern for export-oriented countries” in areas such as Northern Africa and the Middle East. “Access to other markets is a huge concern for these economies. The last thing they want is to be limited in terms of their capacity to trade with one another. We may see it as rhetoric but you see it everywhere now.”
Others shared these fears. “I don’t see an immediate danger of a knee-jerk effect, where we throw up barriers to global trade,” said Paul Sheard, chief economist of S&P Global Ratings. “But we are seeing an uptick in protectionism.”
This week, Andrea Dombret, a member of the executive board of Germany’s Bundesbank, warned that “protectionism and populism still enjoy strong support” in the developed world, adding that the problem had spread to Britain — evidenced in part by the UK’s vote to leave the EU, as well as to many European countries.
The world, Dombret said, needed “better globalisation” that works for the benefit of the many not the few, he said, otherwise “unresolved economic tensions could become the roots of serious political conflict. We need to find a form of global co-operation that lies in between the two extreme, ideologically motivated solutions of national isolation and a borderless global economy.”