IMF warning of protectionism ‘rubbish’, says Trump official

Warnings of US protectionism by Christine Lagarde, head of the International Monetary Fund, and others are “rubbish”, Donald Trump’s top trade official has said in a new attack on the big trade surpluses of China, Europe and Japan.

Speaking ahead of the arrival in Washington of global finance officials for this week’s IMF and World Bank spring meetings, commerce secretary Wilbur Ross said those accusing the Trump administration of protectionism were firing at the wrong target.

The billionaire investor, who Mr Trump has put in charge of trade policy and tasked with finding ways to reduce the US’s $500 billion (€471 billion) trade deficit, said veiled criticism by Ms Lagarde and other defenders of multilateralism about rising protectionism were clearly aimed at the new administration.

“It is! It is! And the response is very simple: we are the least protectionist of the major areas. We are far less protectionist than Europe. We are far less protectionist than Japan. We are far less protectionist than China,” he told the Financial Times in an interview.

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“We also have trade deficits with all three of those places. So they talk free trade. But in fact what they practise is protectionism. And every time we do anything to defend ourselves, even against the puny obligations that they have, they call that protectionism. It’s rubbish.”

Moderate tone

The Trump administration is undertaking a study of the reasons why the US has a trade deficit. By far the biggest contributor is trade with China, but Ireland was also on the US list as the country with which it has the fifth-largest deficit, largely due to trade in pharmaceutical products manufactured here.

His remarks came amid signs that Mr Trump is beginning to adopt a more moderate tone on trade, choosing last week not to label China a currency manipulator despite campaign threats to do so. That has been taken as evidence by some that the internationalists within his White House, such as former Goldman Sachs executive Gary Cohn, are winning hard-fought policy battles against the economic nationalists.

But Mr Ross, who straddles the two camps, insisted that, despite any apparent softening, the Trump administration remained intent on pursuing its “America first” agenda while shaking up Washington’s global trading relationships. He also made clear it saw the Bretton Woods system as partly responsible for what it considers to be the unfair state of things.

He accused Ms Lagarde and other defenders of the current multilateral system of “sloganeering” of trying to preserve a system that had contributed to the ballooning of the US trade deficit since the 1970s.

Bottom line

“ ‘We like it that way. So we don’t want you to disrupt it.’ That’s what they are really saying when you strip it away,” he said. “That’s the bottom line. But that’s not going to happen. Our tolerance for continuing to be the deficit that eats the surpluses of the whole rest of the world – the president is not tolerant of that any more.”

Ms Lagarde, World Bank president Jim Yong Kim and others have stepped up their public defence of multilateralism since Mr Trump’s election. In a speech last week Ms Lagarde called for a defence of the “global economic and financial architecture” while warning that the “sword of protectionism” hung over the world economy.

Their calls reflect what is likely to be one of the main themes at this week’s IMF and World Bank meetings in Washington.

Mr Trump and his aides have sought to placate allies at meetings such as last month’s gathering of G20 finance ministers in Germany by insisting that the US remains committed to international institutions.

– Copyright The Financial Times Limited 2017