One big theme has hung over this week’s meetings in Washington of the International Monetary Fund and the World Bank: The global economy is coming apart at the seams and needs to be sewn back up.
Financial officials have conveyed dire warnings about growing dislocations in trade and cooperation. Russia’s war in Ukraine has caused a huge disruption in global commerce. U.S.-China tensions are on the rise, as are U.S.-EU squabbles over clean energy industries.
“I believe it is no exaggeration to say that almost three decades after the creation of the [World Trade Organization] the rules-based trading system is at a crossroads,” WTO Deputy Director-General Anabel Gonzalez said.
It underscores why the mood around the global gathering has been described as “chaotic,” “disjointed,” and “kind of depressing.” The IMF said the outlook for the global economy is “anemic,” even as economic officials like U.S. Treasury Secretary Janet Yellen tried to project greater optimism.
French President Emmanuel Macron inflamed the tensions as he flew back from China on the eve of the IMF meetings, calling on Europe to resist becoming “America’s followers” as the U.S. challenges Beijing.
The IMF put a tangible cost on the growing rifts, estimating that the world could lose trillions of dollars of future economic output if it split into competing geopolitical blocs.
On the ground in Washington, finance ministers and other global economic officials attempted to tamp down the fires of protectionism and fragmentation.
Even French finance minister Bruno Le Maire tried to do a bit of cleanup: “I don’t see any contradiction between our determination to be more independent on some strategic sectors and our cooperation with the U.S.”
U.K. Chancellor Jeremy Hunt told POLITICO on the sidelines of the IMF meetings that “the big lesson of the last 100 years” was that Europe and the U.S. can successfully defend democracy and freedom when they stand together.
Hunt warned against protectionism — “which will mean that the world will go back to the Dark Ages” — and said he didn’t want to get into a “subsidy race” with the U.S. when it comes to green industries.
Canadian Deputy Prime Minister Chrystia Freeland took a swipe at “the neoliberal formula of free trade and low corporate taxes.” But she still warned that “it would be a huge and historic mistake to react to the abuses of the global trading system by embracing autarky.”
“We shouldn’t forget that trade integration has helped the world to achieve great poverty reduction [and an] improvement in living standards,” World Trade Organization Director General Ngozi Okonjo-Iweala said. “We know it didn’t do everything, that it has some issues, that some people were left behind. But we need to fix that and not throw away the system.”
European Commission Vice President Valdis Dombrovskis called for greater U.S.-EU alignment, rather than following Macron’s lead.
“Our remarkable coordination on Ukraine can and must be replicated in other areas,” he said. “We must make our policy and economic plans converge, rather than diverge. Doing so will boost our economic strength.”
Doug Palmer, Steven Overly and Zi-Ann Lum contributed reporting.