‘A lot of work to do’: IMF chief urges global trade reforms

The International Monetary Fund’s new managing director says she is encouraged by signs of a de-escalation in United States-China trade tensions.

Kristalina Georgieva, speaking with reporters at the IMF/World Bank annual meetings in Washington, DC, urged the world’s two largest economies to work towards a lasting “trade peace”.

But Georgieva also said an urgent updating of trade rules is needed to restore strong growth to the global economy. She called for concerted efforts to reform the World Trade Organization to better account for e-commerce and the service sector, but also to ensure a more peaceful and prosperous world.

Ending trade tensions between the US and China was a positive step that would help bolster global economic growth, Georgieva said.

The IMF estimated that a tentative trade deal reached by Washington and Beijing last week could reduce the harm done by tit-for-tat tariffs imposed by both countries over the past 15 months. Instead of dragging global growth down by 0.8 percent, the impact might be limited to 0.6 percent, she said.

But Georgieva, a Bulgarian economist and the first person from an emerging market to head the global lender, said further efforts were required beyond the potential bilateral trade agreement.

“We are not looking for a small boost in growth,” she said. “We want a bigger acceleration of the world economy and for that, we need more than just that.”

Meeting people’s aspirations

Underscoring the role that positive trading relations have played in reducing conflict and promoting peace, Georgieva called for increased efforts to reform the WTO and ensure that future trade agreements were more adaptable, agile and better reflected the changing nature of the global economy.

The new IMF leader told reporters strengthening multilateral cooperation was one of her top priorities, a subtle jab at the US, the IMF’s largest shareholder, which has pulled back from many other multilateral agreements on trade, climate and other key issues.

In addition, US criticism of the WTO has brought the body’s seven-member Appellate Body – effectively the supreme court of trade – to the brink of collapse by blocking the appointment of new judges. After December, the court will have only one judge.

“WTO countries need to find ways to cooperate and make the dynamics of the world economy stronger,” Georgieva said. “If we don’t, we won’t be able to meet the aspirations of people for better lives and we will not be able to eradicate poverty that is such a drag on the world today.”

E-commerce was not easily regulated in current trade agreements and services were often not covered, she said.

“We actually have a lot of work to do. and it would be a grave mistake to zero only on the relations, as important as they are, of two large economies. We have to think about what we need for the future and roll [up] our sleeves.”

IMF and World Bank officials said both the US-China trade agreement and an agreement reached by London and Brussels about the United Kingdom‘s departure from the European Union would ease the uncertainty that has been weighing on global markets.

But David Lipton, first deputy managing director of the IMF, said the lender’s forecast for stronger global growth in 2020 hinged heavily on the assumption that declines in several key economies – Iran, Venezuela, Argentina, Turkey – would not be repeated.

“We don’t know that that will happen [so] that prospect makes this a precarious forecast,” he said.

Hard work is needed, meanwhile, to complete both the Brexit deal and the US-China trade deal.

White House adviser Larry Kudlow told CNBC on Thursday there was lots of momentum to complete the first phase of a US-China agreement. But, he added, it may not be signed when US President Donald Trump and Chinese President Xi Jinping meet at the Asia-Pacific Economic Cooperation summit in Chile next month.