Day: April 21, 2018

The International Monetary Fund’s policymaking committee said Saturday that a strong world economy was threatened by increasing tension over trade and countries’ heavy debt burden. Longer-term prospects are clouded, it said, by sluggish growth in productivity and aging populations in wealthy nations.

In a statement at the end of three days of meetings, the lending agency urged countries to take advantage of the broadest-based economic expansion in a decade to cut government debt and to enact reforms that will make their economies more efficient.

The IMF expects the world economy to grow 3.9 percent this year and next, which would be the strongest since 2011. But an intensifying dispute between the U.S. and China over Beijing’s aggressive attempt to challenge U.S. technological dominance has raised the prospect of a trade war that could drag down worldwide growth.

“Trade tensions are not to the benefit of anyone,” said Lesetja Kganyago, who leads the policymaking committee and is governor of the South African Reserve Bank.

The U.S. has resisted pressure to back off President Donald Trump’s protectionist “America First” trade policies.

Treasury Steven Mnuchin urged the IMF to do more to address what the Trump administration says are unfair trade practices and called on the World Bank to steer cheap loans away from China and toward poorer countries.

Unfair trade policies “impede stronger U.S. and global growth, acting as a persistent drag on the global economy,” Mnuchin said.

He appealed for the IMF to go beyond its traditional role as an emergency lender for countries in financial distress and said it should more closely monitor the practices of countries that persistently run large trade surpluses.

“The IMF must step up to the plate on this issue, providing a more robust voice,” Mnuchin said. “We urge the IMF to speak out more forcefully on the issue of external imbalances.”

The World Bank, he said, must not back away from shifting its lending from fast-growing developing countries such as China to poorer nations. In a speech prepared for the bank’s policy committee, Mnuchin urged the bank to aim its resources at “poorer borrowers and away from countries better able to finance their own development objectives.”

Many have used the finance meetings to protest Trump’s protectionist trade policies, which mark a reversal of seven decades of U.S. support for ever-freer global commerce.

“We strongly reject moves toward protectionism and away from the rules-based international trade order,” said Már Guðmundsson, governor of the Central Bank of Iceland. “Unilateral trade restrictions will only inflict harm on the global economy.”

While finance officials struggled to find common ground with Washington on trade, they agreed on the importance of coordinating other policies in an effort to sustain the strongest global economic expansion since the 2008 financial crisis.

“We have to keep this group working together,” said Nicolas Dujovne, Argentina’s treasury minister.

In addition to wrangling over trade, finance officials from the Group of 20 powerful economies focused on geopolitical risks and rising interest rates, two threats to growth. Dujovne, whose country is chairing the G-20 this year, met with reporters Friday to summarize talks held as a prelude to the IMF-World Bank meetings.

The U.S. has rattled financial markets with a series of provocative moves in recent weeks.

Last month, it imposed taxes on imported steel and aluminum, and later proposed tariffs on $50 billion in Chinese products as a punishment for Beijing’s aggressive efforts to obtain U.S. technology. China countered by targeting $50 billion in U.S. exports. Trump then ordered his trade representative to go after up to $100 billion more in Chinese products.

Finance leaders repeatedly sounded warnings about a potential trade war.

“The larger threat is posed by increasing trade tensions and the possibility that we enter a sequence of unilateral, tit-for-tat measures, all of which generate uncertainties for global trade and GDP growth,” Roberto Azevêdo, director-general of the World Trade Organization, told the IMF’s policy committee.

French Finance Minister Bruno Le Maire said the steel and aluminum tariffs could lead to retaliation by other countries and “a significant risk that the situation could escalate.” He said “tensions between the U.S. and China have taken a worrying turn.”
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U.S. Treasury Secretary Steven Mnuchin said Saturday that he was contemplating a visit to China for discussions on issues that have global leaders concerned about a potentially damaging trade war.

“I am not going to make any comment on timing, nor do I have anything confirmed, but a trip is under consideration,” Mnuchin said at a Washington news conference during the International Monetary Fund and World Bank spring meetings.

Mnuchin said he discussed the possible trip and potential trade opportunities with the new head of China’s central bank.

Tensions have escalated between the U.S. and China over Beijing’s attempts to challenge America’s technological prowess, raising the prospects of a trade war that could hinder global economic growth. 

Mnuchin said he had spoken with a number of his counterparts who have been forced to deal with U.S. President Donald Trump’s “America First” trade policies, including U.S. tariffs on foreign aluminum and steel and on up to $150 billion in Chinese goods. Some of the leaders, he said, were focused on exemptions from the tariffs.

He said he emphasized that the U.S. was not trying to construct protectionist trade barriers with the tariffs. Instead, he said, “we are looking for reciprocal treatment.”

Mnuchin also said he wanted the IMF to do more to address what the Trump administration believes are unfair trade practices. He also called on the World Bank to redirect low-interest loans from China to more impoverished countries. 
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China has strongly refuted suggestions its multibillion-dollar economic corridor now under construction with Pakistan has “hidden” military designs as well.  

Beijing has pledged to invest about $63 billion in Pakistan by 2030 to develop ports, highways, motorways, railways, airports, power plants and other infrastructure in the neighboring country, traditionally a strong ally.

The Chinese have also expanded and operationalized the Pakistani deep water port of Gwadar on the Arabian Sea, which is at the heart of the massive bilateral cooperation, known as the China-Pakistan Economic Corridor, or CPEC. The strategically located port is currently being operated by a Chinese state-run company .

China has positioned CPEC as the flagship project of its $1-trillion global Belt and Road Initiative, or BRI, championed by President Xi Jinping.

“I want to make it very clear, BRI initiative and with CPEC under it, it’s purely a commercial development project. We don’t have any kind of military or strategic design for that,” said Yao Jing, Chinese ambassador to Islamabad. He made the remarks in an exclusive interview with VOA.

Within five years of finalizing and launching CPEC, Jing said that 22 “early harvest” projects out of the 43 total projects under CPEC have been completed or are under construction, with a total investment of around $19 billion, the largest influx of foreign investment in Pakistan’s 70-year-old history. The projects have already brought 60,000 local jobs and effectively addressed the country’s once crippling energy crisis.

Power plants built under the joint venture, officials say, will have added more than 10,000 megawatts of electricity to the national grid by June, leading to a surplus of power.

While speaking to VOA, the Chinese diplomat urged the United States and India to “come to the CPEC project” and “witness the progress on the ground” for themselves, saying it will enable them overcome misunderstandings vis-a-vis CPEC.

“There are some kind of doubts that may be there are some things hidden in it. I think that when you have an objective lens to look at this project and to come to the ground to find this progress on the ground then you may have a better understanding of what we are doing here,” said Jing.

The Chinese envoy was responding to concerns expressed in Washington and New Delhi that Beijing could try to turn Gwadar into a military port in the future to try to dominate the Indian Ocean.

Jing explained that a state-to-state defense-related cooperation has for decades existed between the two allied nations and China through “normal channels” is determined to contribute to “military and strategic ability’ of Pakistan.

“We don’t want to make the CPEC as such a kind of platform,” the ambassador emphasized.

However, he added, it is “natural and understandable” that the project’s massive size and design has raised doubts and suspicions” about its aims.   

The skepticism about Chinese intentions stems from, among other things, a massive airport being built in Gwadar, with a landing strip of 12-kilometers. China has given nearly $300 million to Pakistan for the construction of the airport.

“Basically, it is for China and Pakistan to make this project a successful economic project, then we can make it clear our intention here,” Jing said.

India is also opposed to CPEC because a portion of the project is located on territory that is claimed by both New Delhi and Islamabad. But Pakistan and China both dismiss the objections as politically-motivated.

CPEC aims to link the landlocked western Chinese region of Xinjiang to Gwadar, allowing ships carrying China’s oil imports and other goods from the Persian Gulf to use a much shorter and secure route and avoid the existing troubled route through the Strait of Malacca.

There are currently up to 10,000 Chinese nationals working on CPEC-related projects in Pakistan. Ambassador Jing said that 21 new mega-projects, including the establishment of Special Economic Zones across the country, are ready to be launched in the next stage with particular emphasis on encouraging private engagement.

In the next five to seven years, officials estimate, CPEC will have created employment for half-a-million Pakistanis. The country’s troubled economy, lately impacted by insecurity and energy crisis, has grown 5.4 percent in the previous financial year, the fastest rate in a decade, and officials forecast the expected growth in the year ending June 2018 will be six percent.

Pakistan’s deepening cooperation with China comes as the country’s diplomatic relations with the U.S. continue to deteriorate. Washington complains that Islamabad is not doing enough to eliminate terrorist groups using the country’s soil for attacks against neighboring countries, including Afghanistan.

While U.S. economic assistance has significantly reduced in recent years, the Trump administration also suspended military assistance to Pakistan in January and linked its restoration to decisive actions against terrorist groups.

Pakistan strongly rejects the allegations and says it is being scapegoated for the U.S.-led coalition’s failures in ending the war in Afghanistan. .

China is also worried about the spread of regional terrorism in the wake of a low-level Muslim separatist insurgency in its troubled Xinjiang border region. But Beijing has steadfastly supported Islamabad’s counterterrorism efforts and dismisses U.S. criticism of them.

China’s arms exports to Pakistan have in recent years exponentially increased while exports of military hardware from the country’s traditionally largest supplier, the U.S., have reportedly declined to just $21-million in 2017 from $1-billion.

“China will never leave Pakistan. I shall say we have confidence in the future of Pakistan,” said Chinese Ambassador Jing, when asked whether terrorism-related concerns might also push Beijing away from Islamabad.

China’s investment under CPEC has also encouraged hundreds of private Chinese companies and thousands of Chinese nationals to arrive in Pakistan to look for business opportunities and buy property. The influx of the foreigners has raised alarms among local businesses and sparked worries that the Chinese labor force will take away local jobs.

Jing stressed that China and Pakistan are working together to promote mutual people-to-people connectivity through enhanced education and cultural linkages to improve mutual understanding.

Ambassador Jing says there are eight Chinese universities working to promote Pakistan’s official Urdu language while 12 Pakistan-study centers are working to promote mutual understanding between the two countries. There are 22,000 Pakistanis seeking education in China.

Pakistani officials say currently, about 25,000 students are learning Chinese language in 19 universities and four Confucius Institutes affiliated with the Chinese Ministry of Education.
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The European Union needs to be exempted from steel and aluminum tariffs announced by the United States in order to work with Washington on trade with China, France’s Finance Minister Bruno Le Maire said Friday.

“We are close allies between the EU and the United States. We cannot live with full confidence with the risk of being hit by those measures and by those new tariffs. We cannot live with a kind of sword of Damocles hanging over our heads,” Le Maire told a press conference during the International Monetary Fund and World Bank spring meetings. 

“If we want to move forward … if we want to address the issue of trade, an issue of the new relationship with China, because we both want to engage China in a new multilateral order, we must first of all get rid of that threat,” he said.

U.S. President Donald Trump announced a 25 percent tariff on steel imports and 10 percent tariff on aluminum imports last month to counter what he has described as unfair international competition.

Le Maire said the EU’s exemption from the tariffs should be “full and permanent.”

The EU is seeking compensation from the United States for the tariffs through the World Trade Organization. Brussels has called for consultations with Washington as soon as possible and is drawing up a list of duties to be slapped on U.S. products.
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