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Tag Archives: Christine LaGarde

Glad I Didn’t Say That! The IMF’s Muddled Message on Trade and Productivity Growth

04 Thursday Apr 2019

Posted by Alan Tonelson in Glad I Didn't Say That!

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Christine LaGarde, Glad I Didn't Say That!, globalization, IMF, International Monetary Fund, productivity, tariffs, Trade

“[S]ince the mid-1990s….declining tariffs have lifted [worldwide] productivity ….”

–International Monetary Fund, April, 2019

“Over the past decade, there have been sharp slowdowns in [worldwide] measured output per worker and total factor productivity….Even before the global financial crisis, productivity growth was slowing in many advanced economies, such as the United States….”

– International Monetary Fund Managing Director Christine LaGarde, April 3, 2017

 

(Sources Chapter 4, “The Drivers of Bilateral Trade and the Spillovers from Tariffs,” p. 103, World Economic Outlook, April, 2019, International Monetary Fund, https://www.imf.org/en/Publications/WEO/Issues/2019/03/28/world-economic-outlook-april-2019#Chapter%204 and “Reinvigorating Productivity Growth,” by Christine Lagarde, Managing Director, International Monetary Fund, American Enterprise Institute, April 3, 2017, https://www.imf.org/en/News/Articles/2017/04/03/sp040317-reinvigorating-productivity-growth )

 

Following Up: The IMF Again (Unwittingly) Undermines Obama’s TPP

19 Tuesday Jan 2016

Posted by Alan Tonelson in Following Up

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Canada, Christine LaGarde, export-led growth, Following Up, IMF, International Monetary Fund, Japan, lobbies, Malaysia, Mexico, multinational companies, Obama, offshoring, TPP, Trade, trade balances, Trans-Pacific Partnership, Vietnam

Does the International Monetary Fund (IMF) have it in for President Obama’s trade agenda? Last week, I noted that a speech by IMF chief Christine LaGarde threw freezing water all over the major economic argument made by Mr. Obama and other supporters on behalf of his Trans-Pacific Partnership (TPP). This morning, the Pacific Rim trade deal was drenched by a similarly frigid bucket when the Fund released the data underlying LaGarde’s remarks.

The economic case for the TPP serving U.S. interests holds that it will speed up the nation’s historically phlegmatic recovery by enabling American businesses and their workers to sell to exciting new growth markets overseas. Unfortunately, as LaGarde’s speech confirmed, everything we’ve learned about the world economy in the last year or two is that the globe’s biggest out-performer – at least among the major powers – is none other than the United States. And as I keep writing, America is also a growth champion when it comes to the TPP countries themselves. Today’s latest set of IMF global growth projections provide yet more evidence.

Like all economic forecasts, the new IMF projections should be viewed with some skepticism. But it’s surely noteworthy that they leave intact, and even may strengthen slightly, the story that TPP will tie the United States more closely to global economic laggards, not leaders. Therefore, it’s likeliest to drag America’s own performance down even further.

The new IMF figures update the last set of projections, issued in October, and nearly every major region and country receives a growth downgrade – including the United States. TPP supporters can also in principle take heart from the Fund’s prediction that America’s growth from 2015 to 2017 will be slower than overall global growth. In absolute terms, the ongoing U.S. expansion will also lag those of TPP signatories like Mexico, and apparently Vietnam and Malaysia.

But it’s vital remember that those countries grow mainly by exporting, and more specifically by improving their trade balances. Since the United States is a major customer for all, their growth is unlikely to benefit America on net.

Moreover, economists pay at least as much attention to changes in growth rates as to the growth rates themselves, and in all three cases, slowdowns are expected this year and next. In Mexico’s case, it’s expected to match the U.S. rate (by 0.2 percentage points compared with the October forecast for each year). The Fund doesn’t provide specifics for Vietnam and Malaysia, but it does believe that expansion in their Southeast Asian region will be weaker by nearly the same degree (0.1 percent this year and 0.2 percent in 2017).

And for the larger TPP signatories, the IMF outlook is gloomy as well. The Fund has downgraded expected Japanese and Canadian growth rates for 2016 and 2017 by a bit less than their U.S. counterpart. But both expansions are still expected to lag America’s in absolute terms. Further, in both these cases, too, net exporting to the United States, will be central to any growth hopes.

Given the size and diversity of the U.S. economy – and its consequent potential for even more self-sufficiency than it’s already displayed – American political leaders logically would be trying to separate America from a weak-growing world still further. But lobbies that benefit over the short run from continued trade expansion (like offshoring-happy multinational companies) still wield the whip hand over Washington, D.C. trade policymaking.  So a slowdown in the foolhardy U.S. rush toward greater integration with that feebly growing, export-dependent world is clearly the best that can be realistically hoped for.

(What’s Left of) Our Economy: The IMF (Unwittingly) Trashes the Case for Obama’s Pacific Trade Deal

14 Thursday Jan 2016

Posted by Alan Tonelson in (What's Left of) Our Economy

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Christine LaGarde, developed countries, developing countries, emerging markets, free trade agreements, IMF, International Labor Organization, International Monetary Fund, Obama, Stolper-Samuelson theory, third world, TPP, Trade, Trans-Pacific Partnership, World Bank, {What's Left of) Our Economy

Whatever reputation the French have had for being master logicians has just been shredded by International Monetary Fund (IMF) chief Christine LaGarde.  Her take on emerging markets’ emerging role in the world economy is completely incoherent, and its fatal flaws have big implications for President Obama’s Trans-Pacific Partnership (TPP) and U.S. trade policy as a whole.

For decades, Washington has told Americans that the U.S. economy urgently needs new trade deals mainly because without them, the nation and its workers would be shut out of all the huge, rapidly expanding third world economies that would surely be the globe’s most powerful growth engine for the indefinite future. Moreover, both Democratic and Republican presidents and Congresses have followed through, as new U.S. trade deals since Mexico’s addition to the North American Free Trade Agreement (NAFTA) have focused tightly on developing countries.

Mr. Obama and other TPP supporters have used the same justification for the Pacific Rim trade agreement, repeating over and over again the mantra that “more than 95 percent of our potential customers live outside our borders….” Obviously, they haven’t been thinking mainly of developed markets like Europe and Japan.

On the level of both individuals and national economies, these claims have always been bogus. As I’ve shown, according to major international organizations like the World Bank and the International Labor Organization, the vast majority of third world populations still earn far too little to buy goods made in wealthier countries like the United States on anything close to a regular basis. Moreover, as my book The Race to the Bottom documented exhaustively, most major developing countries – ranging from Mexico to China and its low-income Asian neighbors – have achieved most of their growth by selling to America and the high-income world. Even the commodity producers that have profited by supplying China have remained dependent on U.S. and other developed markets indirectly, since they have been such important final customers for China’s output.

In a Tuesday speech in Paris, LaGarde echoed recent observations that developing countries are in the process of turning into global growth laggards from global growth leaders. As made clear above, their claim to that former status was dubious at best, but LaGarde’s outlook was also noteworthy for its profound pessimism. She not only warned that emerging economies that borrowed heavily in dollars were vulnerable to monetary tightening moves from the Federal Reserve. She also declared that “emerging and developing countries are now confronted with a new reality. Growth rates are down, and cyclical and structural forces have undermined the traditional growth paradigm.”

Indeed, LaGarde pointed to IMF research projecting that “the emerging world will converge to advanced economy income levels at less than two-thirds the pace we had predicted just a decade ago. This is cause for concern.” (What she failed to mention is that this convergence could also result in part from incomes in the developed world sinking closer to third world standards, as the Stolper-Samuelson theory of international trade’s impact first stipulated.) For good measure, LaGarde reminded her audience that “Clearly, emerging markets are benefiting from the fact that many central banks in many advanced economies still have a very easy policy stance.” In other words, historically easy credit in the wealthier countries had kept third world exports and growth much greater than they would have been otherwise.

Yet even though she made the case that emerging market economies’ prospects were deteriorating and had relied critically on the developed countries even after the financial crisis, LaGarde also mysteriously contended that the emerging world “contributed more than 80 percent of global growth since” the global economy seemed on the verge of collapse and that, consequently, “The economic health of the emerging world is of first-order importance for the advanced economies.”

And in the strangest statement of all, she proceeded to insist that the wealthy countries now need to deal with this situation by propping up emerging market performance with “a stronger global financial safety net” for these economies that expands their access to the swap lines of the richer countries’ central banks.

A respectable case can be made that emerging markets have always been the keys to future global growth. Equally respectable cases can be made for the propositions that they have been the main global growth drivers since the financial crisis; that they have never been the keys to global growth; that they will remain central to the wealthier countries’ well-being; that they are headed to a much gloomier “new normal;” and that they need new aid from the developed countries to avoid major future woes. But no case can be made for all these contentions at the same time – unless reason and logic are abandoned entirely.

Moreover, since the claim behind which LaGarde is putting her money is the one that’s downgrading the third world’s economic importance substantially, and the one conforming with past and future realities, it should be clear that the term “emerging markets” is likeliest to be an oxymoron going forward. As a result, although the United States and other wealthier countries could legitimately decide to lend them a hand for moral and humanitarian reasons, the argument from self-interest is looking ever more far-fetched. And tying America’s fortunes even more tightly to global economic losers via new trade deals like the TPP? That looks downright masochistic.

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(What’s Left Of) Our Economy

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  • (What's Left of) Our Economy
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  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

The Snide World of Sports

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Guest Posts

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

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Current Thoughts on Trade

Terence P. Stewart

Protecting U.S. Workers

Marc to Market

So Much Nonsense Out There, So Little Time....

Alastair Winter

Chief Economist at Daniel Stewart & Co - Trying to make sense of Global Markets, Macroeconomics & Politics

Smaulgld

Real Estate + Economics + Gold + Silver

Reclaim the American Dream

So Much Nonsense Out There, So Little Time....

Mickey Kaus

Kausfiles

David Stockman's Contra Corner

Washington Decoded

So Much Nonsense Out There, So Little Time....

Upon Closer inspection

Keep America At Work

Sober Look

So Much Nonsense Out There, So Little Time....

Credit Writedowns

Finance, Economics and Markets

GubbmintCheese

So Much Nonsense Out There, So Little Time....

VoxEU.org: Recent Articles

So Much Nonsense Out There, So Little Time....

Michael Pettis' CHINA FINANCIAL MARKETS

New Economic Populist

So Much Nonsense Out There, So Little Time....

George Magnus

So Much Nonsense Out There, So Little Time....

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