Christine Lagarde
French Finance Minister and G20 chair Christine Lagarde makes a statement at the G-20 Press Conference at the 2011 IMF/World Bank Spring Meetings at International Monetary Fund Headquarters (IMF), April 15, 2011 in Washington, D.C. IMF Staff Photographer/Michael Spilotro

Managing Director of the International Monetary Fund (IMF) Christine Lagarde warned Thursday escalation of trade conflicts risk reversing the current upswing in global economic growth, urging countries to negotiate regulations in a cooperative manner.

“The momentum behind the cyclical global expansion remains strong, but escalating trade conflicts and financial market volatility highlight downside risks beyond the next several quarters,” Lagarde said.

The head of the global lender made the remarks as the IMF and the World Bank convened this year’s annual spring meetings against the backdrop of widespread trade disputes that the United States has been ratcheting up against its major trading partners worldwide in recent months.

“Countries should work to promote an open and rules-based multilateral trade system that works for all … A cooperative approach to regulation will reap the benefits of financial technology, while addressing risks to stability and integrity,” she said.

Expressing her concern over the unabating buildup of what could lead to a full-blown trade war between Washington and Beijing, Lagarde called on countries to “steer clear from protectionism,” saying that “unilateral trade restrictions have not been proven helpful.”

The IMF chief said that she welcomes bilateral discussions between Washington and Beijing and that disagreements should be resolved at multilateral settings.

According to Lagarde, the spill-over effect of China-U.S. tit-for-tat tariff measures around the world will be limited since the impact on growth is “not very substantial” in terms of global gross domestic production, which is expected to grow 3.9 percent this year.

However, she reminded international finance officials at the meeting, however, that the trade fight between the world’s top two economies will cause an erosion of business confidence that is immeasurable.

“It is more difficult to measure the erosion of confidence. When investors don’t know the terms on which they are trading, they are reluctant to invest. Growth is being driven by more investment and trade, so why damage those engines?” said Lagarde. Enditem

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.