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IMF and WTO leaders warn don’t ‘pull the plug’ on global trade

The leaders of the International Monetary Fund and the World Trade Organization on Tuesday warned against the negative impact of deglobalization for the global economy, arguing instead for smart moves to diversify supply chains.

November 30, 2022
By Andreas Rinke
30 November 2022

By Andreas Rinke

Nov 29 (Reuters) – The leaders of the International
Monetary Fund and the World Trade Organization on Tuesday warned
against the negative impact of deglobalization for the global
economy, arguing instead for smart moves to diversify supply
chains.

IMF Managing Director Kristalina Georgieva, speaking after a
meeting with German Chancellor Olaf Scholz, said globalization
was facing its biggest challenge since World War Two in the wake
of the COVID-19 pandemic and Russia’s war in Ukraine.

“But don’t throw the baby out with the bathwater,” she said.
“Don’t pull the plug on trade that makes us all better.”

WTO Director-General Ngozi Okonjo-Iweala, speaking at the
same news conference, echoed that view, noting a WTO estimate
that breaking the global economy into two trading blocs would
reduce global gross domestic product by 5% in the longer term.

“Retreating from trade, being protectionist will make it
harder – not easier – to solve the problems we have now,”
Okonjo-Iweala said. “Protectionism, decoupling, fragmentation is
very disruptive and it will be very costly.”

Both Okonjo-Iweala and Georgieva said the impact of
deglobalization and fragmentation would hit developing countries
and emerging markets hardest. The impact to gross domestic
product (GDP) in those countries would be in the double digits,
the WTO chief said.

Okonjo-Iweala called for moves to de-concentrate
manufacturing in a smart way and warned against counting too
heavily on “friend-shoring”.

“Who is a friend? A friend today might become very
unfriendly tomorrow,” she said.

Georgieva said growth was slowing in the United States
and China, the world’s two largest economies. She said data
pointed to even lower global growth next year than the 2.7% rate
the IMF had projected in mid-October.

“Business and consumer sentiment points to weakening of
activities in the fourth quarter of this year and continuing in
this same direction in 2023,” she said.

About one-third of the world economy – and about half of the
European Union – would slide in recession in 2023, she said,
adding that inflation was now projected to persist longer,
although it could gradually decline to around 6.5% next year.
(Reporting by Andreas Rinke and Andrea Shalal; Editing by Chris
Reese and Lisa Shumaker)

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