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IMF chief says building ‘peer pressure’ to follow trade rules

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International Monetary Fund (IMF) chief Kristalina Georgieva (left) embraces incoming European Central Bank president ChristineLagarde at the IMF Headquarters during the 2019 IMF/World Bank Annual Meetings on Saturday in Washington, DC. STEPHEN JAFFE/IMF/AFP

IMF chief says building ‘peer pressure’ to follow trade rules

With trade tensions undermining confidence and global growth, economic leaders are increasingly pushing each other to fix the shortcomings that fuelled the disputes, International Monetary Fund (IMF) chief Kristalina Georgieva said on Saturday.

As the US and China remain engulfed in a massive tariff battle and with Brexit turmoil continuing on Saturday, trade overshadowed the discussions of finance officials gathered for the annual meetings of the IMF and World Bank.

Trade is typically an engine of economic growth. But the current disputes have created uncertainty and growth in international commerce has come to a virtual standstill, Georgieva said, noting that problems go beyond bilateral disagreements and extend to outdated trade rules.

“We need to look into what are the reasons we are not making more progress on trade and they are not just the relations between the US and China,” Georgieva told reporters.

Among finance officials there was an understanding on “what are the issues that need to be addressed and building more, if you wish, peer pressure for everybody to play by the trade rule book”.

The IMF projects the Sino-US trade dispute could shave $700 billion off the global economy by next year, mostly by undercutting confidence and freezing business investment.

The IMF’s global growth estimate was revised downward to just 3.0 per cent this year and a slightly better 3.4 per cent next year.

South Africa’s central bank chief Lesetja Kganyago, who chairs the IMF steering committee, said the pain of the trade frictions are felt everywhere, as the uncertainty puts the brakes on investment.

“And because the investment is not taking place the economy is not growing, jobs are lost,” he told reporters. “The trade tensions are not in the best interest of the global economy.”

Washington and Beijing have battled through multiple rounds of tariffs, now impacting hundreds of billions of dollars in trade but there have been recent signs they might have reached a partial agreement to defuse the tensions.

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