Christine Lagarde, Managing Director of the International Monetary Fund stated that “the multilateral trade system has transformed our world over the past generation”. Speaking ahead of the 2018 International Monetary Fund/World Bank Spring Meetings in Hong Kong, she added that multilateral trade had aided in the reduction of global poverty, reduced the cost of living and created millions of new jobs with higher wages.

She stated that there is an optimistic outlook for the current the global economy with the IMF having projected a global growth rate of 3.9% for 2018 and 2019, in January. She added that the same optimism is shared regarding the Asian economy that contributes to two-thirds of global growth.  

In her speech, Lagarde added that it was important for the global economy that countries steer clear of protectionism, reasoning that history had shown that import restrictions hurt everyone and particularly the poorer consumer. Import restrictions also lead to an increase in product prices and a decrease in choice. They also prevent the increased productivity and spreading of new technologies that are otherwise possible.

Apart from steering clear of protectionism, Lagarde added that guarding against fiscal and financial risk and Foster long-term growth that benefits everyone were two other priorities for the global economy.

She explained that although trade deficits and surpluses lead discussions about trade restrictions bilateral imbalances are a snapshot of the division of labor across economies. Lagarde stated that although it is argued that these imbalances are due to unfair trade practices, which must be eliminated, unfair trade practices have little impact on a country’s overall trade deficit with the rest of the world. Bilateral imbalance is driven by the fact that a country spends above its income.

Christine Lagarde’s full speech can be viewed on the World Economic Forum Website.