With trade tensions undermining confidence and global growth, economic leaders are increasingly pushing each other to fix the shortcomings that fueled the disputes, IMF chief Kristalina Georgieva said Saturday.
As the United States 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 International Monetary Fund 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has come to a virtual standstill, Georgieva said, noting that problems go beyond bilateral disagreements and extend to outdated trade rules.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 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 US-China 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 in 2020.
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.
- Expand the trade rule book -
In his first comments since talks with US president Donald Trump last week, China's top trade negotiator Liu He said Saturday the countries have "made substantial progress in many aspects and laid an important foundation for a phase one agreement."
Trump announced a "substantial" deal on 11 October after negotiations with Liu's delegation, which he said included a promise to increase purchases of US farm products and protections for intellectual property. Details were scant, however.
China is "willing to work together with the US to address each other's core concerns on the basis of equality and mutual respect," Liu said, according to a report on Taoran notes, a social media account run by the Beijing's official Economic Daily.
Protection for US technology and allowing American firms to provide financial services, like insurance and banking, in China are key features of the US complaints, but those issues are not clearly covered by existing rules governed by the World Trade Organization.
Despite being at the center of the conflict, US treasury secretary Steven Mnuchin said the fight for "fairer trade" is "preparing a foundation for future growth."
Georgieva said countries must "be willing to expand and improve this (trade) rule book," especially to include services and e-commerce which are not covered by traditional agreements for trade in goods, she said at the close of the IMF meetings.
Britain's finance minister Sajid Javid assured officials in Washington that his country has taken steps to prepare for Brexit, whether or not they agree on a negotiated exit, but conversely also stressed the need to "reinvigorate multilateral cooperation."
"We remain deeply concerned about the impact of trade tensions on the global economy, and on the rules-based trading system," he said in a prepared statement.