IMF, World Bank Group Annual Meetings to Examine Global Economy, Trade Landscape
The Annual Meetings of the World Bank Group (WBG) and International Monetary Fund (IMF) will kick off on Friday 12 October, setting in motion three days of high-level meetings that are set to look at the shifting pace of the global economy one decade after the international financial crisis, including the impact of current trade tensions among key players.
The 12-14 October meetings will be held in Bali, Indonesia, bringing together finance ministers, development ministers, central bank governors, and a host of other stakeholders. Preparatory meetings and briefings are already well underway. The IMF and WBG hold these types of high-level events biannually, convening earlier this year in Washington for their Spring Meetings, which saw officials exchange similar fears over global growth prospects while working to make advances on development financing. (See Bridges Weekly, 26 April 2018)
In the months since the Spring Meetings, various global agencies have issued warnings that global economic growth and global trade growth prospects are not as optimistic as previously believed. This is due partly to the increased use of unilateral trade measures by some major economies, as well as the uncertainty that these and other factors pose for trade and investment, particularly with regards to manufacturing.
The IMF released its semi-annual World Economic Outlook (WEO) on Tuesday 9 October, with the Fund’s figures noting that while current growth projections are an improvement over those seen between 2012-2016, growth now appears to have “plateaued.”
Furthermore, the IMF noted, the 3.7 percent growth predicted for 2018-2019 is actually lower than what the institution had previously predicted, given that figures from both April and July of this year had suggested a 3.9 percent growth rate for 2018 and 2019.
Similar predictions have been issued by the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO), as both organisations have lately published muted estimates for trade and economic growth.
Moreover, high-level officials have said that moving away from multilateral cooperation could potentially have a chilling effect on efforts to achieve key sustainable development objectives. (See Bridges Weekly, 27 September 2018)
The Annual Meetings have a series of headline events on their schedule. Among the key ones are meetings of steering bodies for both organisations, namely the International Monetary and Financial Committee (IMFC) and the Development Committee. While the former is focused on the IMF, the latter involves both organisations. Both groups involve ministers from about two dozen members of those institutions. Ministerial-level meetings will also occur in multiple configurations on the event margins, and various high-profile reports are due to be released during the event.
Trade in the spotlight as IGO heads meet
On Wednesday 10 October, the leaders of the IMF, WBG, WTO, and the Organisation for Economic Co-operation (OECD) issued a joint statement stressing the value of trade for spurring economic growth and urging governments to act to lower trade tensions.
“The trading system is not perfect – but it represents the best efforts of governments around the world, working together for 70 years, to find ways to cooperate on trade issues,” they said, meeting in Bali in preparation for the IMF-World Bank gatherings.
They highlighted in particular the multilateral trading system’s role in tackling poverty, supporting growth and development, and facilitating greater economic integration.
“Progress in many key areas has been stalled for some years. And in the meantime the world hasn’t stopped. New economic priorities have emerged. Technology is transforming how we produce and how we trade. Geopolitics continue to evolve,” said WTO Director-General Roberto Azevêdo.
He also referred to ongoing efforts among some groups of WTO members to consider possible reform options for the global trade club, noting that “in this context it is vital that everyone who believes in the system raises their voice.”
Lagarde: new trade rules essential
Indeed, the past fortnight has seen international organisation chiefs issue repeated, concerted calls in support of multilateralism and the global trading system, with the head of the IMF devoting much of an earlier speech previewing the Bali meeting to both subjects.
Last week, IMF Managing Director Christine Lagarde outlined three core challenges that the global economy is facing, specifically “building a better trade system; guarding against fiscal and financial turbulence; and rebuilding trust in policymaking and institutions.”
For example, Lagarde also highlighted the possibility of plurilateral deals under the aegis of the WTO, should accords involving the full organisation’s membership not be viable. The WTO already has some such deals in place, such as the Information Technology Agreement (ITA), under which select members have agreed to slash tariffs on information and communication technology (ICT) products and extend such benefits to all WTO members, even if they are not ITA parties. There is also the Government Procurement Agreement (GPA), which commits its members to a series of rules and market access offers regarding foreign bids for government contracts.
“Of course, fixing the system also means making it fit for the future. Here again, we could use flexible trade agreements to unlock the full potential of e-commerce and other tradeable services, such as engineering, communications, and transportation,” she suggested.
Trade was not the only area that Lagarde addressed in her speech, cautioning also about the risks of “fiscal and financial turbulence,” particularly on the ten-year anniversary of the global financial crisis, and calling on governments to take greater steps to tackle corruption and other ills that could erode trust in institutions. She further raised the importance of climate action, including the uptake of carbon pricing systems, and the need for better social protection programmes.
More specifically on WTO reform, she called upon countries to take a cooperative approach focused on crafting “a global trade system that is stronger, fairer, and fit for the future,” going beyond just addressing and ending “trade disputes” to focus instead on an improved rulebook for the multilateral trading system.
“The immediate challenge is to strengthen the rules. This includes looking at the distortionary effects of state subsidies, preventing abuses of dominant positions, and improving the enforcement of intellectual property rights,” she said.
The IMF chief referred in particular to the above-mentioned discussions underway among some WTO members on how to reform the global trade club’s rules going forward. She cited, for example, informal papers that have been floated by the EU and Canada to that end, calling these “positive steps.”
The EU’s paper was been released publicly by the bloc’s executive arm a few weeks ago. Canada has also held a meeting with senior officials and vice ministers in Geneva, with a ministerial-level meeting with approximately a dozen WTO members planned for 24-25 October in Ottawa. Moreover, G20 trade ministers meeting in Mar del Plata, Argentina, last month also called for collaborative approaches to tackling trade uncertainty and addressing WTO reform, including from non-G20 members. (See Bridges Weekly, 20 September 2018)
These reform discussions were referred to during a panel organised at the WTO Public Forum last week in Geneva, Switzerland, which featured among the discussants a set of WTO ambassadors, specifically from the EU, New Zealand, and the US, as well as a former negotiator for the Chinese government.
“We are not in good shape. I don’t need to tell you that tariff wars are occurring, that some countries take measures that are probably not in line with the rules of this house,” said EU Ambassador to the WTO Marc Vanheukelen. He outlined a multi-pronged approach that the EU is backing, which he said would address the functioning of the global trade club, including transparency and notifications; dispute settlement issues including the impasse in appointing Appellate Body judges; and the need for new rules on industrial subsidies, technology transfer, and sustainability-related issues.
For his part, US Ambassador to the WTO Dennis Shea said that “the WTO must address the unanticipated challenges of non-market economies. The WTO current rules, combined by certain flawed rulings by the WTO [Appellate Body], leave members and the system insufficient tools” to deal with such concerns.
While agreeing with the EU on the need to improve WTO functioning, and noting that Washington and Brussels are collaborating on a proposal for the organisation’s November meeting of the Goods Council on transparency and notifications, he disagreed with EU suggestions on how to change the functioning of the Appellate Body. For example, Shea said that proposals such as granting Appellate Body members one single, longer term would lead to less accountability, not more, and thus not answer Washington’s concerns.
Kim: Avoid losing sight of poverty eradication, potential of technology
World Bank Group President Jim Yong Kim, for his part, has previewed his approach to the Annual Meetings by calling upon countries to recommit themselves to the effort to meet the “twin goals” of eradicating poverty and boosting shared prosperity, which were announced five years ago and have a delivery date of 2030.
Speaking last week at Stanford University in California, he noted that today, “736 million people still live in extreme poverty – that’s living on less than US$1.90 a day. But 25 percent of the population lives on less than US$3.20 a day, which is the poverty limit, or index, in many countries. And almost half of the world lives on less than US$5.50 a day.”
Moreover, the advent of new technologies is changing how the world’s poorest view their “reference incomes,” namely the income levels they use as a basis of comparison for considering their own situation, which has implications for aspirations and satisfaction levels.
He also flagged technologies’ potential to support efforts to create a more resilient workforce and, by extension, society, through the adoption of new programmes focused on social protection. Building infrastructure to support the development of a more digitally-focused and adept economy could also be a game-changer, he suggested, while calling for a far greater investment in supporting improved education and health systems.
“We’re focusing on outcomes, not inputs. And looking backwards, we found that investments in people – to improve outcomes in health and education – were far more correlated with economic growth than we ever thought. And with the pace of innovation accelerating, it’s a safe bet that those correlations will only get stronger in the future,” he said.
The World Bank chief also made repeated references to the challenges posed by climate change, which have since been made even more prominent after the Intergovernmental Panel on Climate Change (IPCC) released its highly-anticipated report on what governments would need to do to limit global temperature increases to 1.5 degrees Celsius above pre-industrial levels.
The IPCC’s scientists found that carbon emissions would need to fall drastically by the year 2030 in order to avert catastrophic temperature increases. (For more on the IPCC report and meeting, see related story, this edition)
“There’s not a single African leader who won’t tell you that the boot of climate change is on their necks. Recent episodes of droughts and flooding illustrate how things have changed, and we need to respond to those changes,” Kim said.
The World Bank has worked extensively on supporting climate finance, along with conducting research on topics such as carbon pricing, noting that climate change could have devastating implications for development prospects. The IMF and World Bank Group are also “strategic partners” of the Carbon Pricing Leadership Coalition, which is working to advance the development of knowledge and ideas to support the uptake of carbon pricing schemes.